The bulls were able to provide follow through to the upside in the cash SP500 yesterday. We rallied directly to the calculated target of the recently broken supply line and then stalled for the remainder of the day. However, the break of the target at 1295.31 was qualified.
Although profit taking by traders is not unexpected after such a bullish day, there are signs that there may be more upside to come before this rally is ultimately over. Indications are that the D-Wave on the daily chart from the May 2 high is complete. Right now I am calling it D.A, which would imply that the move up from the June 16 low is D.B. It is coming off of a completed buy setup and bullish technical divergence.
The next challenge to the bulls is hourly TDST resistance at 1296.22. Although we poked above it yesterday the break was invalidated at the close. Additionally, we will have to see if today's price action invalidates the breaking of our supply line target of 1295.31 on the daily chart. Since the hourly RSI is now indicating a bull trend I would have to view any pullback from here as just that, a pullback. If the rally continues over the coming days then the next strong area of resistance on the daily chart is 1312-1318.
Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.
P.S. There may not be a daily posting tomorrow.
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