Please keep in mind that we will have a monthly price flip if we close June below 1327.22. Such a flip will trigger the already completed TD Combo and sell counts on the monthly chart. These signals would then occur with bearish divergence between price and the composite index, and between price and the derivative oscillator. In sum, the risk of a significant top in equities remains high.
As stated last week, the weekly chart is also quite weak right now - if not outright bearish. Note that we have now met the calculated minimum objective (1282.73) associated with the qualified break of the TD Demand Line (upsloping green line on chart). Last week's price action also confirmed the break of the short (red) moving average and we've now closed below the medium (blue) moving average. We'll see if we can confirm that break this week. The TD Trend Factor target is just below the market at 1265.68.
The weekly chart's price pulse scenario can be captured (p. 109) by these words from Tony Plummer's book "Forecasting Financial Markets: Technical Analysis and the Dynamics of Price": "A short term sell signal is triggered as the x-wave falls below the bottom of the Beta-wave. However, the subsequent y-wave rally may abort the signal by rallying back above it; indeed, it may even retrace close to the peak levels established by the alpha-wave and the delta-wave. A longer-term (or regenerated) sell signal is given when the z-wave penetrates below the bottom of the x-wave." The pulses are marked on the chart.
I am expecting the upcoming y pulse (wave) to begin before the March low is broken and for it to lift prices above the peak of the alpha pulse but perhaps not the delta pulse.
Bottom Line: The allocation meter is now at +50%. If meeting the TD Line objective and the Trend factor target are not enough then the March low is the next target. 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%.
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