SPX Daily Chart - 6 April 2011

     After closing above the 1332.28 target (dashed horizontal purple line on the chart) on April 1, the break was qualified on April 5. The next target higher must now be discussed, and it is derived from two distinct TD Sell Setups. Both are shown by the number nine on the chart with the first having finished on February 11. After completing a Sell Setup a market will usually reverse course, if there is going to be a change in trend, within four sessions. The market peaked five sessions after that first setup - note the word 'usually' was used! The second sell setup completed on March 31 and four sessions have now passed.
     There is always an associated 'risk' level with each completed sell setup. If broken in a qualified manner you can say that the odds favor a continue run higher until at least the completion of sequential or combo countdown. The two risk levels of concern now constitute our next price target higher. They are shown on the chart by dashed lines and are at 1345.5 and 1344.04. The location of these lines mean that we are essentially looking at a retest of the February high.
     Another point of interest that I continue to watch on all the charts is what the RSI indicator is saying in its role as a trend indicator. On the daily chart it said a bear market began at the mid-February high. In fact, the current rally sees the RSI still below the area reserved for resistance in bear markets (shown by the parallel red horizontal lines), so we can still call the rally from the mid-March low as a counter trend rally.
     Bottom Line: Price is now testing the February high and critical sell setup resistance levels while the RSI shows that, if this is only a corrective rally, we have about run out of steam. The market is at a key decision point. The daily chart remains in a bearish mode with the allocation mix at a +50% reading. The chart would turn bullish with a qualified break of 1345.5. My next post will be on Monday.