Still Need to Perfect the Buy Setup

The cash S&P500 formed an “outside” price bar yesterday while closing much higher. Although it was bar #9 in a possible TD Buy Setup we have not yet “perfected” that pattern. To do so still requires a move below 888.86.

The rally yesterday did trigger a technical “buy” signal (bullish divergence between RSI and Composite Index) and exceeded the TD Supply Line. If the break of the supply line is confirmed today (need a higher high) it projects to 937.17. TD Resistance is now at 946.21 and the TD Trend Factor target at 944.86. These three numbers give a target zone of 937 – 946.

We closed at resistance from the short moving average (red line) and the 50% Fib retracement yesterday. I think that we need to move above 927.09 to “activate” the target zone mentioned above. If we can’t break 927.09 over the next two sessions I think we will go back down to perfect the pending TD Buy Setup.

Bottom Line: I am bearish on the equities due to the recent sell signal on the weekly chart and lack of perfection on the daily chart’s DeMark Buy Setup.

Market Lower Over the Past Week

At the start of my holiday last week I was of the opinion that “… equities have started their most significant pullback since the rally from the March 6 low began. The “proof”, so to speak, will be a weekly technical sell signal which we have to wait until Friday for (but seems increasingly likely).” The sell signal was registered on the weekly chart last Friday and the cash S&P500 has moved lower, hitting targets at 903 and then the weekly moving average and a Fibonacci level near 888.

We have bounced off that 888 target (which is also near the 23.6% Fib retracement). Old weekly resistance (always watched to see if it becomes support) is at 890. On the daily chart we have reached 8 bars down towards a possible TD Buy Setup. The TD Demand Line (thin dashed green line on today’s chart) is at 889 and the TD Supply Line (thin dashed red line) is at 907.66. Both of these lines would be qualified if broken today.

Let’s see if the market can “perfect” the potential TD Buy Setup by moving below 888.86. I think we need to see that before one can speculate on any renewed rally to the upside.