SPX Daily Chart - 17 Feb 2011

SPX Daily Chart - 16 Feb 2011

     We have now had three trading sessions since the sell setup completed (with bar nine) on February 11th. The associated risk level is at 1345.50. More likely to squash this setup (if it is to be squashed) is time. Usually if there is going to be a reaction it will occur within 4 bars. We are running out of time.
     We have now fulfilled all of the price targets we had mentioned (horizontal lines on the chart between 1333-1336. We are also back in a position to watch for a break of the level 2 and 3 TD Demand Line (upsloping dashed line just below the market), which could be an early warning of a trend reversal. Otherwise, the daily chart remains bullish until we at least see a price flip (close today below 1329.15) and a price pulse reversal.

SPX Daily Chart - 15 Feb 2011

     The cash SP500 traced out a downtrending day yesterday. Can we claim a top has been made? Not at all. To be so bold we would need confirmation in at least one way; preferably more. Certainly a price flip would be nice. For today that would require a close less than 1321.87. A qualified break of the level 2 TD Demand Line would also be nice. However, that can't happen today since yesterday was a down close.
     Actually I would prefer to see a reversal in my price pulse work. At the lowest level of the pulse (daily chart) we would need to break the beta - z trendline which stands at about the 1305 level today. The weekly pulse actually has an "easier" reversal point right now - the February 10 low of 1311.74. It gets confusing because the weekly price pulse chart can break this level on any day of the current week, not just Friday. These two price pulse reversal lines are drawn in blue on today's chart.
     Bottom Line: In my work I want to see a price flip and a price pulse reversal before calling the daily chart bearish.

SPX Daily Chart - 14 Feb 2011

     First things first. Yesterday's uptrending price bar has nullified the pending Combo 13 pattern on the weekly chart. On the daily chart (above) we made bar nine of a 9-13-9 pattern last Friday. If this is an exhaustion signal we should see a reaction this week.
     At the present time there is still bearish divergence between price and the Relative Strength Indicator (RSI). There is also a cluster of resistance just above the market based on Gann and fibonacci relationships between waves one and three in this up trend. We are in wave five of the D-wave sequence now.
     I have also drawn in the Level 2 TD Demand Line under the market. A qualified break of this line would be viewed as an early warning of price exhaustion. The more prominent upsloping line is the D-Wave 2/4 trendline.
     Where does this daily work fit within the larger weekly picture now that the Combo count is gone? We still have an active Sell Setup in place (risk level 1345.5) and an aggressive Sequential 13 count is now in place. The aggressive count compares the opening price of bar 13 (vice the closing price) to the high two bars ago.
     Bottom Line: Although the indicators are pointing towards a possible top over the next few days, the trend; at this moment, remains bullish.

SPX Weekly Chart - 11 Feb 2011

     A 9-13-9 pattern has completed on the daily chart. On the weekly chart (shown above) we are waiting for a weekly price flip (close less than the close 4 weeks ago) to trigger the combo 13 bar. However, we have now closed above the signal 'risk' level of 1324.30 (horizontal dashed cyan line). If this break of the risk level is confirmed this week then the combo signal is null and void.
     The close above the risk level can only be ignored:
    -- If the opening price on Monday opens below the risk level  OR
    -- if the opening price on Monday opens below Friday's closing price AND the high this coming week fails to exceed last week's high of 1330.79.
     If the Combo signal does vanish then we have to keep our eyes peeled on how we close; it is possible to get sequential bar 13 to print this week. Meanwhile, the most bullish outcome would be a price this week above 1355.43 as that would put any possible combo/sequential signal on hold.
     Bottom Line: Let's see how the cash SP500 opens this morning. I will review the weekly action and the daily chart tomorrow.