Looks Like a 2-4 Week Downleg Underway

Weakness continued in the cash S&P500 market yesterday as the index printed a down trending price bar on the daily chart. The decline both confirmed the recent break of the TD Demand Line and also met the minimum target of 1052.74. The low yesterday was at the 38.2% retracement level (see chart). Failure to stay in contact with the short moving average (red line) would open the door to challenge the TD Trend Factor target at 1002. The Weekly short moving average will be in that area as well next week.

If my analysis of the Level 2 price pulses is correct the odds are high that this current pullback will last another 2-4 weeks. It also implies that the move from the July 8 low of 683.2 is complete. Note that the 38.2% retracement of this rally is near the TD Trend Factor target of 1002.

Bottom Line: I am certainly not yet ready to call an end to the bull run from March but I am certainly in the bear camp for the near-term. 9-13-9 stop at 1084.05; Parabolic SAR at 1080.15. The point where I would say the bull run from March is in trouble is currently at 978.51. It will be an interesting look at the weekly chart this weekend as we begin to put this in perspective of the longer term charts. The new monthly (and even quarterly) are due soon also!

Time For Bulls to Be Very Wary

A very interesting session in the cash S&P500. The index did nothing until the Fed announcement when it rallied. After making a new rally high it then turned down and finished clearly lower. When all was said and down it was an outside bar with a lower close. There are now quite a few technical reasons to be bearish; at least on the short-term.

1. We are currently working off of a complete TD Sequential Reinforcement (otherwise known as a 9-13-9 “sell” pattern). Now that we have had a price “flip” the odds are much improved that a decline has begun. The stop loss level with this signal is at 1084.05.
2. The RSI has formed bearish divergence with price.
3. Although confirmed and qualified through the TD Supply line, the index still failed and reversed to qualify the TD Demand Line.
4. The Level 1 chart is now forming a “z” pulse which has broken the beta - x trendline. This is a sign of weakness. The Level 2 chart will turn bearish on a break below 1057.46.
5. The latest closing high, 1074, is opposite 666 on the Gann wheel. Our 1080 high is Three turns of a circle up form zero.

Of course the question now is how significant of a decline is at hand, and this is the harder question. What can be said is that a move below yesterday’s low will qualify the TD Demand Line break and targets 1052.74. As this is where the short moving average is it should be used as our first support level. Failure to hold this level opens the door to challenge the TD Trend Factor target at 1002. The Weekly short moving average will be in that area as well next week.

Bottom Line: I am certainly not yet ready to call an end to the bull run from March but I am certainly in the bear camp for the very short-term. 9-13-9 stop at 1084.05. Let’s see what happens at the short moving average. One step at a time. The point where I would say the bull run from March is in trouble is currently at 978.51.

Still Waiting For A New High

The cash S&P500 rallied yesterday, formed an up trending price bar and failed to confirm Monday’s break of the TD Demand Line. Instead, the upward price movement qualified the TD Supply Line (dashed down sloping red line) and is nearing yet another new rally high. Even though we are working off of a complete a TD Sequential Reinforcement (otherwise known as a 9-13-9 “sell” pattern) my price pulse work insists that a new high is required before any talk of a significant or long-lasting correction can begin.

Bottom Line: Still bullish and waiting to see a price recorded above 1074.77. Without such a move any decline here should be considered a pullback within the on-going bull run. It would take a move below the September 2 low to change my mind.

Bulls Still Look Frisky

A pullback is underway; the first since this leg of the rally started on September 2. Although we broke below the TD Demand Line (dashed up sloping green line) yesterday the market did rally back to close above it. To confirm the demand line break we must make a lower low today, otherwise the bulls may very well make a move for the Supply Line at 1073.06. Will this pullback be just a momentary setback in the bullish stampede?

Even though we are working off of a complete a TD Sequential Reinforcement (otherwise known as a 9-13-9 “sell” pattern) my price pulse work insists that a new high is required before any talk of a significant correction can begin.

Bottom Line: Still bullish until we see a price above 1074.77 recorded. Without such a move any decline here should be considered a pullback within the on-going bull run. It would take a move below the September 2 low to change my mind.

P.S. on the World Gold Index. A down trending day but not overly convincing. We found support at the 23.6% fib level and the short moving average. Generally speaking, I am currently neutral on this market and looking for sideways-to-down movement over the next few weeks. I will update again as conditions warrant.

A Complete 9-13-9

After ten consecutive sessions with higher highs the cash S&P500 paused on Friday by forming an inside day price bar. It was enough, however, to complete a TD Sequential Reinforcement (otherwise known as a 9-13-9 “sell” pattern). It also brought a readjustment to the TD Supply Line.

First off … my price pulse analysis still requires a higher high. At this point any move above 1074.77 will do. Please note that a higher high is necessary but not sufficient for a reverse of the bull trend.

Secondly, any sell off here should be viewed as a pullback/correction. A few levels to watch as things develop: The “risk” level associated with the 9-13-9 pattern is at 1084.05. Both TD Lines may be qualified at this point. The Supply line sits at 1073.63 and the Demand Line at 1061.89.

Bottom Line: Still bullish until we see a price above 1074.77 recorded. Without such a move any decline here should be considered a pullback within the on-going bull run. It would take a move below the September 2 low to change my mind.

P.S. on the World Gold Index. On the daily chart we have perfected a 9 bar TD Sell Setup and completed a TD Sequential “sell” countdown. The calculated risk level of 1029.6 has not been breached. The TD Demand line will not be qualified if broken today but a close below 1008.1 will “flip” the price trend to down. In addition, the RSI has made bearish divergence with the Composite Index and the TD REI POQ triggered a “sell” when we went below 1007.2. Therefore, it still looks to me like this index wants to make a double top with the February high. However; being a longer-term trader/investor the bullishness on the monthly chart will not let me take any bearish. If I was long I would be thinking about my stops (close below 1008.1) very carefully.

Weekly Chart Review, September 20, 2009

With another up trending price bar on the weekly chart the TD Setup sequence has now reached 10 bars. As Mr. DeMark states in his book New Market Timing Techniques, the appearance of a new Setup sequence “… either Before, On, or After the 13 Countdown days and prior to the first price flip day will produce a Recycle.“ He then goes on to provide further options that Jason Perl also recommends. That is, you can ignore such a subsequent setup if it is smaller in price than the previous Setup or larger than 1.618 times in price of the previous Setup. Therefore, since the current Setup is now greater than 100% but less than 161.8% we must recycle our Setup. This changes the Sequential and Combo counts to those shown in the chart. Bottom Line: There are no longer any pending Sequential or Combo “sell” signals on the weekly chart.

We do, however, have a perfected TD Sell Setup in place. If a downside reaction is to take place in response it will usually happen within 4 price bars. I like to look to other indicators for confirmation that a Setup might be a bearish development. First off I watch the interplay between the RSI and Composite indicators. Currently the RSI is at a new high for the move but the Composite is falling. This would be bearish divergence *if* the RSI were to turn down from here. As an aside, please note that the RSI is threatening to break upward through the range typically associated with bear market resistance. Combining the position of the RSI with a perfected TD Sell Setup tells us that we are at an important market juncture; although sometimes it always seems like that!

Another item of interest is that the Long moving average (solid green line) is virtually at the week’s price high and also coincident with the TD Trend Factor target of 1079.38. Oftentimes these moving averages identify important support and resistance levels. Will it now? The key over the coming week will be what happens on the daily chart. As you know, that chart just completed a 9-13-9 “sell” pattern.