Daily and Monthly Chart Comments

The cash S&P500 formed a down trending price bar on the daily chart Monday. The index opened below the TD Demand Line and then went below last Thursday‘s low; putting the bears in position to challenge the 1014.91 level. We actually touched 1014 yesterday but the bulls stepped in and pushed the market to 1020. However; by closing at 1020.62 we have had the “price flip” needed to help “confirm” the recently completed TD Sequential countdown.

Enough on the daily chart. Let’s switch gears and look at the new monthly (chart shown), where we had an up trending price bar in August. It was stated in the monthly report for July that “The next target up is 1012-1028“. We hit that and closed the month at 1020.62. The rally from the March low has now gone on long enough (in time) that the monthly swing chart (depicted by the orange lines) has turned up for the first time since the bear market began in 2007. This rally came after the monthly chart perfected its TD Buy Setup in February. Since counter-trend rallies usually only last about 4 price bars in time we must watch for the resumption of the downtrend.

There are two good indicators to watch to try and catch the start of a renewed downtrend. The first is the TD Demand Line (upward sloping dashed green line) which now sits at 970.59. A break below that level would be qualified -- a strong indication that the rally is failing. Additionally the RSI indicator is showing a potential negative reversal. A turn down in this oscillator would trigger a “sell” signal from this tool.

Bottom Line: Although we can’t claim the rally from the March low is complete, the monthly chart now contains the parameters to watch for to signal the end of that bull move. A break of 970.59 and a turn down in the RSI.