TD Sequential Countdown Complete

We have most certainly reached an interesting point in the movements of the daily cash S&P500. Two days of increased volatility have left us less than 2 points from where we started. On both Monday and Tuesday we reached for the Supply Line break projection of 1038, hitting 1037.75. At the same time we remember that the risk level associated with the printing of TD Combo 13 on August 7 was 1038.92. On top of that … the cash S&P500 completed a TD Sequential Countdown at the close yesterday! What does it all mean? That is quite a question! Let's start by reviewing the Supply Line and TD Combo action.

The TD Supply Line price projection was also 150% of the August 7 - 17 correction. However; hitting these projections does not necessarily mean we can’t go higher. In fact, the weekly chart (see last Sunday’s post) has higher bullish targets.

The TD Combo risk level is a stop-loss level from a trade that would have been taken short on the signal of August 7. In my mind that signal led to the August 7-17 correction and is over. Please note that the swing chart (as indicated by the solid orange lines) has again turned higher and is at a new high for the rally. To me this indicates the downside price action associated with the TD Combo signal is over, regardless of whether we’ve hit the stop-loss level or not.

That brings us to the present and our completed TD Sequential which has a risk level associated with it of 1049.93. At the same it should be noted that the RSI is still not confirming this rally and that TD REI POQ will trigger a “sell” if the cash opens above 1026.21 today and then trades below that level. This would seem like a sound strategy at this point for the daily chart.

So do I look for a decline here? Yes. How deep of a decline? I turn to the price pulses for guidance. Without a sharp sell off over the past two days I now think the odds of a decline below the 978 level here are minimal at best. Furthermore, any decline from here would be followed by a move to new highs. Key point: A decline down to 978 is possible here.

My initial downside target would be the four day “price flip” of 1007.37. This is also in the area where the short moving average is. I would expect the Medium moving average (solid dark blue line now at 979 and rising) to contain the decline.

Bottom Line: Weakness here (limited to a decline to the 978 level) would be followed by a move to new highs as the overall rally continues (in time) to at least the Equinox.