After four consecutive up trending weeks we finally had a pause (via an “inside” week) in the cash S&P500. Going into the week I reasoned that “Without an open above 1014.14 we shouldn’t expect to close Friday above that level. This implies a flat to down week”. This sentence sums up the just concluded week quite nicely.The inside week has allowed the supply side of the market to readjust. The new TD supply line (downward sloping red dashed line) is at 1006.12 over the coming week and will be qualified if broken. Additionally, the index is now in a position to qualify a break of the Fibonacci 38.2% retracement (horizontal blue dashed line) at 1014.14. Recall that qualification implies a good chance that the market will be able to hold these levels by the end of the week.
On the negative side …. The weekly RSI turned down this week after posting its highest value since the March low. Meanwhile the composite index did not make a new high. This sets up a bearish divergence and is a “sell” signal. However, this signal comes without a DeMark signal. TD Combo (dark red) is furthest along and stands at eleven. Even with the aggressive version of TD Combo it takes a minimum of thirteen bars to generate a signal. The lack of a DeMark signal also applies to TD REI (even though it has now poked above the .4 level) since the current price bar contains a lower close.
To me, the lack of a DeMark signal implies that even if we have started a correction it does not mean that the rally from March is over.
I will combine the above information with the latest daily chart data in tomorrow’s posting.
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