Expecting a Recycle

The cash S&P500 formed a down trending price bar yesterday as we pullback in response to the perfected TD Setup of 11/17. I am waiting to see whether we get a price “flip” (close less than the close four sessions earlier) before the TD Setup count reaches the 161.8% level (about 1128). If so then the TD Combo “sell” signal will be canceled (recycled) rather than just postponed. This will happen on a close below 1109.30 today.

Bottom Line: Still neutral but willing to consider buying on a pullback if Combo gets recycled. I am thinking (based on price pulse structure) that general weakness may prevail until after the Thanksgiving holiday.

*NEW* Technical Analysis of Chart positions:
Dollar Index: Long from 75.32; stop 74.10; weekly chart on perfected buy setup.
Waiting for initial signals on the following charts: Gold Index,10 yr Bond Yield,
Cash SP500 and the CRB Index.

Expecting a Pullback

With a small range, up trending day yesterday the situation is little changed from Wednesday. I am waiting to see whether we get a price “flip” (close less than the close four sessions earlier) before the TD Setup count reaches the 161.8% level (about 1128). If so then the TD Combo “sell” signal will be canceled rather than just postponed.

I suspect that the signal will end up being canceled since oftentimes a pullback begins within 1-4 sessions of completing a perfected setup (which occurred on Monday). Also note that yesterday’s small decline was enough for the RSI to make bearish divergence with price, as did the Derivative Oscillator. The RSI also bearishly diverged with the Composite Index.

Bottom Line: Still neutral but willing to consider buying on a pullback. I am thinking (based on price pulse structure) that general weakness may prevail until after the Thanksgiving holiday.

*NEW* Technical Analysis of Chart positions:
Dollar Index: Long from 75.32; stop 74.10; weekly chart on perfected buy setup.
Waiting for initial signals on the following charts: Gold Index,10 yr Bond Yield,
Cash SP500 and the CRB Index.

Now What?

Even though it was only an “inside” day on the cash S&P500 it was enough to cancel the pending TD Sequential “sell” signal. With a new TD sell Setup in place it also prevents the combo “sell” from executing. So now do I turn bullish? No.

For starters, if price were to extend the setup without a price flip so that the 161.8% level was reached the TD Combo signal would be back on. Additionally, even if the sequential were to recycle here there is still the fact that oftentimes a pullback is experienced within 1-4 sessions of completing a perfected setup. Also note that we failed to move above Monday’s high and so we failed to confirm the TD supply line break. Also still of importance:

* The RSI would make yet another bearish divergence with price on a pullback today. So would the Derivative Oscillator and the RSI would also bearishly diverge with the Composite Index.

* A Sequential “buy” has been triggered on the dollar index which is important because the dollar index and equities have been moving in opposite directions since March. The index had an up trending day yesterday.

Bottom Line: I will remain neutral but willing to consider buying on a pullback.

*NEW* Technical Analysis of Chart positions:
Dollar Index: Long from 75.32; stop 74.10; weekly chart on perfected buy setup.
Gold Index: Neutral.
10 yr Bond Yield: Neutral.
Cash SP500: Neutral.
CRB Index: Neutral.

Decision Day

One rally day complete. Can the bulls do it one more time? Today the “magic” number is 1098.51. A close below that number and the TD Sequential “sell” signal is triggered. Close above it and we have a new TD Setup, which cancels the pending sequential “sell” signal and prevents us from reaching a combo “sell” (today is #13). Beyond that, a move above yesterday’s high would confirm the TD supply line break of yesterday and of course would also be bullish.

And so the door is still open to a possible Tuesday reversal. Do the bulls have to slam it shut? What other non-bullish factors may come into play?

* The RSI would make yet another bearish divergence with price on a pullback today. So would the Derivative Oscillator and the RSI would also bearishly diverge with the Composite Index.

* A Sequential “buy” has been triggered on the dollar index which is important because the dollar index and equities have been moving in opposite directions since March. Unless the index trades below 74.10 there are still reasons on why the equities are topping here.

Bottom Line: I have been neutral since October 9th and remain that way now while waiting for resolution of the Sequential signal; which will come today. If it gets canceled (for reasons explained above) I am willing to consider getting bullish.

Hmmmm.... Still Waiting on the Sequential

As outlined yesterday the weekly chart leans to the bulls being back in the driver's seat if they can continue this rally over the next two days. What does the daily chart have to say about this?

First off, two nice up trending days would most likely result in a new TD Setup, which would cancel the pending sequential “sell” signal and prevent us from reaching a combo “sell”. Such a rally would also likely break, qualify, and confirm the overhead supply line; which is bullish. So yes, a bullish Monday and Tuesday would confirm the weekly chart’s rosy outlook for the next few weeks.

But what if we don’t get a strong couple of days to start the week? The morning futures are strong but what if, for instance, the retail sales numbers disappoint this morning? The first thing to note from the chart is that unless we open above 1098.78 on the cash S&P500 we will make a qualified break of the TD Demand Lines (upward sloping dashed green line). This would, even if we have a bullish Monday, keep the door open to a possible Tuesday reversal. What other non-bullish factors may come into play?

* TD Sequential signal on 11/9. To execute this signal we have been waiting for confirmation. We almost got it on Friday (needed a close below 1093.08 but we closed at 1093.48!) Today we would have to close below 1093.01. The stop level with this even would be at 1121.95
* The RSI has recently formed bearish divergence with price.
* Finally, the Sequential “buy” was triggered on the dollar index which is important because the dollar index and equities have been moving in opposite directions since March. Unless the index trades below 74.10 there is reason to believe the equities are topping here.

Bottom Line: I have been neutral since October 9th and remain that way now while waiting for resolution of the Sequential signal. If it gets canceled (for reasons explained above) I am willing to get bullish or at least remain neutral. I won‘t fight the weekly chart.

Weekly Chart Review, November 15, 2009

Well that didn’t last long. After just two down trending weeks we are back to having an up trending price bar to examine. The positive reversal noted in the RSI last week had a projection up to 1098.66 which was filled. This means that the bull lives on; which was confirmed with a new rally high. We also broke through the TD Trend Factor target of 1079 and the TD Supply Line (down sloping dashed red line). Neither of these breaks were qualified but we will most likely open above both lines Monday morning fulfilling the qualification criterion. So where does that leave us?

To confirm the break of both lines on Monday will require (at least) follow through on Tuesday by means of a higher high. That is the challenge for the bulls as we start the new week. A failure on their part will leave us with failure at the TD Trend Factor target, continued bearish RSI/price divergence, and an open downside price projection of 987.51, which is below the critical monthly chart value of 1019.95. 987.51 also coincides with a 50% retracement of the move from the TDST support line.

If the bulls are successful then the door is open to continue the charge upwards. Perhaps 1145-95 and completion of a TD Combo (we are on bar #10 now)?

Tomorrow I will merge the daily chart work with this weekly chart posting since it's emphasis is on what happens Monday and Tuesday. Enjoy the rest of the weekend!