Not Much New to Report

Another up trending day in the cash S&P500 and there is not much new to add. Once again the index is in a position where it can not qualify the overhead TD Supply Line (dashed, nearly horizontal, red line at about 1018). This should keep a lid on any rally attempt here.

Bottom Line: Even if we were to post a slightly higher high here (1022-1025 has been a longstanding target) I think the evidence favors the view that the pullback associated with the Level 3 Beta pulse (see the July 25 post) is the next significant event on the immediate horizon. I won’t change this view unless the TD Combo risk level calculated at 1038.92 is broken.

Bulls Rally Into FOMC Announcement

Wow! Not only did we not confirm the recent break of the TD Demand Line but we are back to threatening new highs. The cash s&p500 clearly found support at the short moving average (solid red line) and then rallied to form an up trending price bar. However, the upward price movement also put the index in a position where it can not qualify the overhead TD Supply Line (dashed, nearly horizontal, red line at about 1018).

Bottom Line: The s&p500 has been consolidating for the past eight sessions. Even if we were to post a slightly higher high here (1022-1025 has been a longstanding target) I think the evidence favors the view that the pullback associated with the Level 3 Beta pulse (see the July 25 post) is the next significant event on the immediate horizon. I won’t change this view unless the TD Combo risk level calculated at 1038.92 is broken.

Looks Like th Correction is Underway

Yesterday’s down trending day in the cash S&P500 has brought the index down to the short moving average (solid red line) at 993. This price action has broken and qualified the TD Demand Line (up sloping dashed green line). Confirmation today requires that we close lower than 1004.41 and trade below 992.40. Such confirmation projects 982.87, coincident with a Fibonacci level and should be viewed as the next level of support. Below that lies 961 (Fibonacci and TD Trend Factor).

Bottom Line: I think the evidence favors the view that the pullback associated with the Level 3 Beta pulse (see the July 25 post) is underway. I believe that; as a minimum, 961 will be hit; TDST support (875.32) will hold and that the correction will be complete no later than September 2. After that the rally resumes. But first this correction!

TD Combo 13 -- Will It Lead To A Correction?

In general the cash S&P500 has been moving sideways over the last five sessions. In particular it formed an “inside” day on yesterday’s daily chart. After threatening to march higher last Friday after breaking and qualifying the TD Supply line (horizontal dashed red line) we failed to confirm that action yesterday. Another bear-friendly development was that the RSI failed to make a new high last Friday with price; solidifying the recent technical “sell” signal (bearish divergence between the RSI and Composite indicators).

The weakness just mentioned comes on the heels of a TD Combo 13 signal. For today, the TD Demand Line (up sloping dashed green line) stands at 1004.41. A break below this level will qualify the demand line. Initial support levels are: around 996 (the short moving average) and 961 (Fibonacci and TD Trend Factor).

Bottom Line: I still think the evidence favors the view that a pullback is beginning. In my work definitive proof would be provided by a break of 992.49 (last Thursday’s low). TD Combo risk level calculated at 1038.92.

On the Verge

After another strong rally day and the cash S&P500 is threatening to march higher. Once more we are at a point where we have broken and qualified the TD Supply line (horizontal dashed red line) and now wait confirmation. Arguing against a strong upward thrust is the fact that we recently had a technical “sell” signal (bearish divergence between the RSI and Composite indicators) and that TD Combo hit bar number 13 Friday.

Even with the “better than expected” jobs report and subsequent share rally on Friday I still think the chart evidence favors the view that a pullback is forthcoming. In my work definitive proof that the pullback is underway would be provided by a break of 992.49 (last Thursday’s low).

Weekly Chart Update for August 9, 2009

With a fourth consecutive up trending week in the cash S&P500 we have reached our next upside weekly chart target of 1012-1028. Why was this a target area? Here are three of the reasons:
1) The March 6 to June 12 leg of the rally was 289.44 points (956.23 - 666.79). 50% of that value is 144.72. Add that to the July 10 low of 869.32 and you get 1014.04.
2) 1013 is conjunct 667 on the square of nine.
3) The chart shows (horizontal blue dashed line) the Fibonacci 38.2% retracement (1014.14) of the entire decline from 2007-2009.

But note that we have reached this resistance area without a DeMark signal. TD Combo (dark red) is furthest along and stands at eleven. Even with the aggressive version of TD Combo it takes a minimum of thirteen bars to generate a signal. This means that we have a minimum of two more weeks to wait before we can get a weekly chart sell signal from this tool. This alone implies that even if we were to correct from here we have not reached the end of the rally from March.

So let’s see what TD Retracement has to say about the coming week: Without an open above 1014.14 we shouldn’t expect to close Friday above that level. This implies a flat to down week. An open above 1014.14 implies we close above that level next Friday. This implies another up trending week. So watch Monday’s open closely. However, DeMark also has something to say about the current case where we have penetrated the 38.2% level (last week’s high was 1018.00) but closed below it (we closed at 1010.48). Since we closed higher this week than last we should now expect to eventually reach for (as a minimum) the half-way point between the 38.2 and 50% retracement levels. This value is 1067.79.

How would I interpret the preceding paragraph? Any temporary weakness that occurs over the next week or so should be followed by a push higher. That is, if our expected August correction begins this week we should expect it to be followed by new highs. I have no reason to deviate from my roadmap of July 25 at this time.