Weekly Chart Review, October 3, 2009

To recap: The quarterly chart (discussed Thursday) indicates that the bear market rally from March is maturing. Long-term investors that never got long this year should not yet be worried about “missing the bottom”. Although we can’t claim that this maturing rally from the March low is complete, the monthly chart (depicted yesterday) shows that the forty point area between 978 and 1020 is the current ground that the bulls must hold. We have now declined to the top (1019.95) of that area, and so what can the new weekly chart tell us?

After once again being turned back by the Long (solid green line on the chart) moving average we ended up with a down trending week on the cash S&P500. The decline is a reaction to the recently perfected TD Sell Setup as well as bearish divergence between the RSI/Composite Index pair and the RSI/Derivative Oscillator indicators. As an aside, it is important to note that the RSI was threatening to break upward through the range typically associated with bear market resistance. It couldn’t quite do it and has now turned down.

Over the coming week there are two salient points. First, the TD Demand Line will not be qualified if broken. Second, the Short Moving Average will be at about 1014. These two features should provide support early in the week. If so, the ball will then be in the bulls’ court. It will be imperative for them to move this market back above resistance … the Long Moving Average and TD Supply Line which will be at about 1066-1071.

Bottom Line: The bears have used the daily 9-13-9 “sell” opportunity to their benefit. It is now up to the bullish camp to use underlying support to take back control. Until they can do that I have to remain near term bearish. With a longer-term view I would not be buying equities here. If long during this great rally that began in March I would be watching to protect profits. Eyes should be focused on the 978 level; particularly if the support mentioned earlier can’t hold. There is important support at 983-986 which the bulls definitely don’t want to see broken.

Review of the Monthly Chart

We have now had six positive months in a row after making low in March 2009. As seen yesterday, the new quarterly chart shows this to be a maturing bear market rally. Let’s see what the new monthly chart has to say.

At the end of August the area to watch for a signal that the rally was failing was 970-978. We have held that and have reached for the TD Trend Factor target of 1085. There are three good indicators to watch that would signal a high probability that the rally is complete. The first is the TD Demand Line (upward sloping dashed green line) which now sits at 1021.22. A break below that level would be qualified -- a strong indication that the rally is in trouble. Additionally the TD REI oscillator (top pane) is in overbought territory. A move below the September low of 991.97 would trigger a “sell” signal from this tool and reinforce the break of the Demand Line. Finally, a move below 978.51 would indicate that the upward moving Level 4 Alpha price pulse is complete.

Bottom Line: Although we can’t claim the rally from the March low is complete, the monthly chart shows that the forty point area between 978 and 1020 is the current ground the bulls must hold.

Quick Daily chart note: We broke and qualified the TD Demand Line yesterday. If qualified today it projects to very close to the previously discussed TD Trend Factor target of 1002. Otherwise ... my opinion remains the same: Although certainly not ready to call an end to the bull run from March, I do remain in the bear camp over the near-term. At this point it will take a new high to get me to consider turning bullish. 9-13-9 stop at 1084.05; Parabolic SAR now at 1074.28. The point where I would say the bull run from March is in trouble is currently at 978.51.

To continue this series .... the weekly chart will be presented over the weekend, and back to the daily on Monday.

Time to Step Back -- Quarterly Chart Review

On the quarterly chart of the cash S&P500 we had a very strong up trending bar …. That makes two in a row from the recent low of 666 set in March 2009. Notice how we were able to keep contact with the Long (green) moving average at the low. Since the low the up move continues to look like a bear market rally.

The only positive signal at the low (in the technical indicators I follow) was the TDPOQ on an 8 period TD REI which turned positive when price went above 956.23 in July. Without confirmation I consider that as indicating an oversold counter-trend rally. The REI now indicates that the oversold condition has been relieved and at this point the market is still in the process of determining what the demand level is for stocks is after the huge decline of 2008.

There is a broad area of overhead resistance from 1120-1170 (50% Fibonacci retracement level, previous TDST Support and the Medium (blue) moving average). Above that is 1225-1240.

Bottom Line: The quarterly chart indicates that the bear market rally from March is maturing and that long-term investors should not yet be worried about “missing the bottom”. At the same time it certainly is not inviting anyone to go short. The battle for the rest of the year may very well be the 903 level. If we close above that value at the end of the year the odds of a significant new low become quite low and a double bottom around 666 becomes more likely.

Watch The Bonds For Clues....

It was an up trending day with a lower close on the cash S&P500 Tuesday. While the high of the day was just under the weekly chart’s long moving average, the low of the day was contained by the short moving average on the daily chart. This type of waiting activity, trapped between two moving averages, doesn’t tell us much.

Unlike yesterday, another strong rally today would qualify the TD Supply Line (now at 1077.45) and put the bulls in a position to continue their party. However, that weekly Long moving average still has to be reckoned with (still at 1070.6).

Another complicating factor is the 10 year bond yield. Longer-term the bonds look like they want to rally …. Which I think has negative implications for equities in the current economic environment. However, over the shorter-term the 10 year market is at a balance point right now. It is possible that one more rally attempt is at hand. If so it may give the equity bulls one more rally also. So …. Watch the bonds closely here.

Bottom Line: Although certainly not ready to call an end to the bull run from March, I do remain in the bear camp over the near-term, even with Monday‘s strong rally day. At this point it will take a new high to get me to consider turning bullish. 9-13-9 stop at 1084.05; Parabolic SAR at 1077.09. The point where I would say the bull run from March is in trouble is currently at 978.51.

Bulls Back Out In Force!

The bulls were back out in force Monday as they rallied the cash S&P500 back above the short moving average. Is the pullback off of the 9-13-9 pattern already over? For what its worth, I’m not convinced -- yet. Even a new high doesn’t necessarily mean a return to the bull run -- it may just be a retest.

At this point I am not ready to change my near-term, bearish-leaning position. For one, even another strong rally today would not qualify the TD Supply Line (now at 1077.99). Secondly, the weekly Long moving average still has to be reckoned with (now at 1070.6). Before getting carried away by yesterday’s strength, let’s see what type of technical situation we have if we approach a new high.

Bottom Line: Although certainly not ready to call an end to the bull run from March, I do remain in the bear camp over the near-term, even with Monday‘s strong rally day. At this point it will take a new high to get me to consider turning bullish. 9-13-9 stop at 1084.05; Parabolic SAR at 1078.59. The point where I would say the bull run from March is in trouble is currently at 978.51.

Not Much New to Add

Not much new to add as weakness continued in the cash S&P500 market Friday with a down trending price day. The price action failed to stay in contact with the short moving average (red line) and has now opened the door to challenge the TD Trend Factor target at 1002. The Weekly short moving average will be in that area as well this week. However …. Reaching that point does not necessarily mean in a straight line; and I don't mean to imply we have to get there this 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 over the near-term. At this point it will take a new high to turn me bullish. 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.

Weekly Chart Review, September 27, 2009

It was an up trending week on the cash S&P500, but not the type of up trending price bar that the bulls are proud of. After reaching the Long moving average (green line) and the TD Trend Factor target at 1079 the market rolled over and finished near its lows. The decline can be called a reaction to the recently perfected TD Sell Setup.

Another technical reason in support of a downside reaction is the bearish divergence between the RSI/Composite Index and RSI/Derivative Oscillator. As an aside, please note that the RSI was threatening to break upward through the range typically associated with bear market resistance. It couldn’t quite do it. Combining the position of the RSI with a perfected TD Sell Setup tells us that the odds are high that the first pullback since June/July is underway.

Bottom Line: The bulls were on the verge of confirming and extending their grip on this market but it appears that the bearish camp has used the daily 9-13-9 “sell” opportunity to their benefit. Is that enough to turn the larger bullish tide? Let’s continue to watch the daily chart closely this coming week. At this point I think that longer-term investors should not be buying equities; but at the same time it is a bit early to abandon ship.