Lots to talk about today. Yesterday the allocation mix meter fell to +50% as the market continued to weaken. With the break of TDST support confirmed the door to the next downside support target of 1285.54 (TD Trend Factor) was opened. We hit that mark today but closed just above it. The low yesterday was at 1284.72. Recall from the May 27 weekly post that the weekly TD Demand line break had a calculated objective of 1282.73. The weekly medium moving average sits at 1287.17 this morning. Now that we are in the 1282-1286 target zone, what next? More on this below; but first a remark on the weekly chart's false upside breakout of late April/early May.
The methodology I was using to validate the break of the risk (stop loss) level on the weekly chart at the late April/early May high (see weekly chart updates) is generally the criteria used for TDST line breaks. Instead, if one uses the criteria usually used for qualifying TD demand/supply line breaks, the risk level was never broken in a qualified (confirmed fashion); i.e. it was a false breakout. I will keep this in mind going forward.
So now what? First we have to see whether the current support zone holds. If we can't hold here then the 1275-1279 support area is next, followed by 1263-1266 and then 1249-1257. Today I will be watching for the end of a sequential buy countdown on the hourly chart. We ended yesterday on bar #11.
Bottom Line: The allocation mix meter is now at +50%. I consider myself more an investor than trader and having only half a position is indicative of my belief that risk is getting quite high here. This does not mean I think the cash SP500 is about to immediately implode. My near term scenario has the current decline ending shortly (within the next five sessions) and holding above the March lows. This will be followed by a choppy rally that takes us back above the 1344 level. However; I am now quite concerned that the high may already be in for the rally from the 2009 low.
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