Weekly Chart Update

To summarize the ideas presented from the DeMark studies, we are looking for opportunities to trade based on signals that roll from higher to lower timeframes. Since the beginning of the year we have been focused on a perfected sell setup forming on the monthly chart. On the next lower timeframe we saw a perfected sell setup also occur; but that trade was not taken because of the technical indicator filters used. Keep in mind that after a perfected setup has occurred the market ‘usually’ experiences a trend reversal, correction, or consolidation within four price bars of bar #9. In my methodology if one were to short the market it would be in anticipation of a reversal - not a correction or consolidation. So how do you know which will occur after a setup? You don’t know with any certainty, and that is the reason for the indicator filters.

Another good indicator (and filter) of a trend reversal is the break of a support or resistance level. Note in the weekly chart (attached) that since the rally started last March the support levels (horizontal dashed green lines) have always held. In fact they have never even been seriously challenged; but that is changing. A close of the weekly chart below 1069.30 would add to the case that the monthly sell setup is leading to a tradeable short position. Let’s watch to see if that happens.