On Monday the cash SP500 continued its rally from the deeply oversold condition it found itself in at the August 9th low. This low was in conjunction with a TD Buy Setup. My take continues to be that this rally will end at/near a fibonacci/moving average/TD Trend Factor target and will be followed by a retest of the low.
Our initial target zone in the 1180 area was reached but only managed to cause a hesitation in price before we rallied through it yesterday. However, this break-out was not confirmed (although qualified) and could be a signal that the next target could prove fatal to the bull case. That next 'target' was the 1215 area yesterday since the short (red) moving average was sinking towards the fibonacci level there. For today that moving average will be even lower, about where we closed yesterday. Therefore the bulls will have a large test today right from the open. In conjunction with this is the test of the risk level associated with the sell setup on the hourly chart. We finally broke above that level (1204.08) in a qualified manner at the close yesterday. However, an open this morning below that value will be non confirmation and may spell trouble. On the other hand, if the bulls can 'pass' this test the door is open to 1245.
Bottom Line: I still believe that we will need to retest demand (the low) again before we can get a sustainable bullish rally. The current demand line (dashed green line) reflects the "retest level" well. For now however, we need to watch how price reacts at the short moving average and hourly sell setup risk level this morning. Failure would be a clear indication that the oversold bounce may be completing. The allocation mix meter remains at +25%.
Note: I will not be able to post August 18-26.
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