Weekly Chart Update for September 12, 2009

Now that the TD Sequential “sell” signal is losing its luster on the daily chart (there have been 12 price bars since it was generated and the swing chart has turned back up) the weekly comes into play as the arbiter on the current bull/bear struggle.

On the weekly chart we just printed an up trending price bar that brought us to a new high. It was also a TD Setup bar #9. What is one supposed to make of this new Setup? Well, the first thing to note is that we already have an active Setup in place from May 22. Since there can only be one active Setup at a time each trader must decide for herself which Setup to use. In my case I choose to ignore the new Setup until it is larger in price length than the older one. Thus, as stated last week, we will have to watch for a new Setup only if the market exceeds 1063.01.

Of course the question of the new Setup is important because it would imply that the bullish trend will be reinforced and continue. The same notion is being measured by the “risk”, or “you are wrong” level associated with the current TD Combo #13. That level is at 1062.74. Both this value and the 1063.01 level must be qualified and confirmed (if broken) to come into play. It is therefore important to note that based on the current weekly bar NEITHER level can be qualified if during the upcoming week -- although they can be qualified and confirmed the following week.

What does the preceding paragraph imply? A couple of things. First, we must watch the daily chart for its own TD Setup. The daily is now on Setup bar #4. It is possible that by next Friday we may be looking at a 9-13-9 “sell” pattern. Secondly, weakness next week may lead to a bearish RSI/Composite divergence on the weekly chart. It might also lead to a weekly chart close less than 1026.13 which would nullify the potential new Setup we have been discussing.

Bottom Line: The bulls are close to confirming and extending their grip on this market. I would not fight this uptrend until a definitive sell signal is generated by the TD indicators. However, if the bulls can’t clearly assert their dominance I would be very careful after the equinox.