Pullback Completed? That is the Question.

The S&P500 formed an up trending price bar Wednesday as it was able to maintain contact with the medium moving average (solid blue line). The current pullback has done enough to turn the swing chart (shown by the solid orange line) down but the trend is still up until 978.51 is broken.

If my roadmap is to hold (I.e. we get a new high on or after the equinox) I think we need to hold that 978 mark as this is a key Level 2 Price Pulse point. Can the bullish camp hold? Yesterday was a start in that direction. Let’s update the “encouraging” potentially bullish indications I have been chatting about over the last two days.

1) The RSI made low 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 below the TD Sequential risk level of 1049.93.
2) The Composite index is in the same situation as the RSI.
3) The REI has returned to below the -.40 area and at this point can be characterized as mildly oversold. A TD POQ buy signal would be triggered today if we open at or below 1003.43 and then subsequently exceed that level.
4) Fibonacci retracement of the most recent price swing (up from the August 17 low as defined by the swing chart). The market opened above the 38.2% level and then traded through it, the 50% and 61.8% retracement levels. This is often a sign of near-term price exhaustion.

The four points above are now leaning towards a rally.

As far as price pulse theory is concerned: If yesterday’s low was in fact the end of the Level 2 “x” pulse then the odds favor a move to new highs from here. However that is not yet a provable premise.

Finally …. Let’s take a look at the current supply and demand lines. We are in the position today where either line would be qualified if broken.

Bottom Line: The correction may already be over but there are indicators to help us judge whether taking a bullish stand is the best play. The call for a rally here would be in question if we fail to get an REI signal (see point 3 above) or if we break the demand line (994.21).

P.S. Of course the wild card is the jobs report to be released at 8:30 am EDT.