The cash S&P500 ended strongly last week with an up trending day that punched through the down sloping TD Supply Line and reached the short moving average.The futures are strong (+11) early this morning (5:00am NY time) as the bulls look to overcome the recent pullback from August 28 to September 2. A minor sign of strength to start the week would be an open today above 1014.90, as this would invalidate the downside break of the TD supply line on the weekly chart. Such an open, combined with a move above Friday’s high (1016.48) would confirm the upside break of the demand line on the daily chart. This would give a price projection of 1042.89; implying a new high.
Here is the latest on the potentially bullish indications I have been chatting about over the last few days:
1) The RSI made low last Wednesday below its level of August 17th while price did not. This is a positive reversal formation and has a price projection that goes with it: 1044.44. Note this is a minimum projection, but it is quite close to the demand line projection above. Keep in mind that both values are below the TD Sequential risk level of 1049.93.
2) The Composite index is in the same situation as the RSI.
3) Interestingly, the anticipated TD POQ buy signal was not triggered on the REI last Friday due to a strong open. At this point I don’t see this as a sign the budding rally will fail, rather I think it hints that a dip will come rather quickly this week after some strength to open the week.
4) On the recent pullback (Aug. 28 - Sep. 2) price opened above the 38.2% Fibonacci retracement level and then traded through it, the 50% and 61.8% retracement levels all in one day (Sep. 1). This is often a sign of near-term price exhaustion.
The four points above point to a continuation of the rally from last Wednesday’s low but hint that we may see a quick pullback after some opening strength and before we actually reach new highs.
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