Level 1 Price Pulses

When all was said and done yesterday we ended up with a down trending price bar on the daily chart of the cash S&P500. When prices approached the TD Supply Line (at 1052.33 yesterday) supply did indeed enter the market and we could go no higher than 1052.18. It must also be noted that the Long moving average on the weekly chart sits at 1053.77 and was itself providing resistance.

When the market sold off and broke below Friday’s low we confirmed the qualified break of the weekly TD Demand Line. This event has an associated price projection to 987.51, which is below the monthly chart’s critical support value of 1019.95. The break of the daily TD Demand Line on Friday was also confirmed yesterday and projects to a similar target at 979.31.

On the bullish side of the coin we had bullish divergence between price and the RSI at the close, and it came in the area where bull markets typically find support - around the 40 area. If any technical development sets the stage for a rally this does. If the bulls can’t take advantage of this set up then we know they currently have weak hands. Furthermore, I think that any rally that can be mustered has a very, very slim chance of making a new high from here. In fact, such a rally would most likely provide us with our missing TD Sequential “sell” countdown bars #12 and #13.

To wrap up I present the latest Level 1 Price Pulse chart. It shows that a complete five wave Elliott impulse pattern was completed at the October 21 high. The chart went on a “sell” when we broke and closed below the beta - x trend line (light blue solid line) the same day. The following alpha pulse then popped to “kiss the trend line goodbye”. Now, the pulses are hinting that the decline from the high is impulsive (five waves) which implies the correction is not over - even if we were to rally over the next few sessions. Over the very short term the market would turn bullish on a close above the alpha-delta trend line (in dark orange). Such a break should not be bought in my opinion since the Level 2 chart is now bearish (see yesterday’s mention of the trend line break). I interpret the chart to say “get bearish on strength here.”