After one trading day into the new week it is apparent that the equity market is not concerned with the debt ceiling, it is concerned with the trendline that defines the entire rally from the 2009 low. This line is shown on today's chart of the weekly cash SP500 in orange. We broke this line in a confirmed manner Monday morning by opening below it. The spike up from that open ran out of steam as we approached moving average (both short and medium) resistance.
The price action has now confirmed that the Y-pulse completed at the July 8th high. Per the Price Pulse Model (from Tony Plummer's book "Forecasting Financial Markets: Technical Analysis and the Dynamics of Price" on page 109, revised edition 1990) we've been discussing over the past several weeks, a longer-term sell signal will be given if the z-pulse were to penetrate below the x-pulse low of 1258.07. The chart initially turned negative when the Beta-pulse low was broken during the week of June 10.
As a follow-up to the last weekly post I have included the Derivative Oscillator (top pane). Look what happened at the May 6 (delta pulse) high: this indicator failed at the zero line. Are we about to fail at the zero line again? If the action remains weak this week the answer will be yes.
However, there is usually always something for the opposite side to hold on to. In this case the bulls will want to argue that a deep decline will be hard to immediately engineer from here for two reasons. One is that the Demand Line (dashed green line) can not be confirmed broken this week and secondly .... the daily chart has just completed bar #13 of a sequential buy countdown! More on this development tomorrow when I look at the latest daily chart.
Bottom Line: At this point there is no reason to abandon the price pulse model. The bears will reconfirm their control if they can move this market below 1258.07. The allocation meter remains at +50%. That is, a half position in equities.
1 comment:
Excellent analysis. I would offer an additional lower level observation. Yesterday's bounce up came almost exactly off Dow 12000 (11999.06). But that bounce had no real pepper to it. I would expect one more down day before we reach what looks like coincident exhaustion counts developing on the half, one and two hour charts. I have the half at 8 Seq, hourly at 10 Seq and the two at 11 Combo. I suspect those counts might tie in later today to arrive at "13's" to tie in with yesterday's daily count. But at what price level is the question.
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