SPX Daily Chart - 12 May 2011

     After two days without power and the internet it is good to be back to a normal routine. But wait ... it is still not normal. Apparently Blogger has been having a major outage. Who knows when this post will make it onto the interwebz!
    On May 5 the cash SP500 closed below the short (red) moving average but that event went unconfirmed the next day, leading to a bounce higher. On May 10 the index closed above the short (red) moving average but again the next day's action failed to confirm and a pullback ensued. On Wednesday we once again closed below the short (red) moving average. Yesterday the price action confirmed the break. By the hypothesis I am testing, this warns that we will see price below yesterday's low by the end of next week. Let's see what happens.
     If the same analysis is done using TD Lines, we see that the price action failed to close below the demand line (dashed green upsloping line) indicating short term bullishness. For today, there can be no 'qualified' break of the supply line (downsloping dashed red line), and this seems to support the notion that another dip down is necessary. The primary support zone to watch on any decline is the area shown by the blue box.
     Bottom Line:  The allocation mix meter remains at +100%. I still expect to see new highs before the April low is violated.

SPX Daily Chart - 9 May 2011

     After reaching for the medium (blue) moving average a couple of sessions ago, the cash SP500 has bounced just a tad to remain in contact with the short (red) moving average. This firming of prices occurred after the failure to qualify the break below the short moving average. Over the next few days I will continue to watch how price interacts with the moving averages and, if we rally, whether a sequential countdown completes.
     Bottom Line:  The allocation mix meter remains at +100%.

SPX Weekly Chart - 6 May 2011

     The big development last week was the qualified break above the risk level of 1363.53. The market then immediately reversed and the focus in my recent posts has been on false breakouts. This led to the hypothesis that we will see new highs without breaking below 1294.7 (the April 18 low).
    As far as Demark counting goes, the next possible sell signal would be a sell setup; which, if it were to occur, is still three weeks away.
    Let's take a look at the RSI (top pane). Can one make the case that a massive bearish divergence has occurred just as we had a potentially false breakout above the risk level? Yes, but I don't buy it. Why? I think the recent positive reversal takes precedence. That reversal is shown by the two arrows on the RSI which match the November 26, 2010 and March 18, 2011 price closes. This reversal calculates to a 1432.81 price target. The price target associated with the break of the TD Supply line (which has now been qualified) is 1429.87.
     Finally, a note on the Elliott Wave structure. A good friend of mine is quite good at this technique and is confident that the count shown on the chart is correct. I am aware of the subjectivity of this method but am impressed enough with his work that I decided to show his count - with his permission of course! The take away is that we may now be in a fifth wave, which would be the final part of the entire move up from the July 2010 lows.
     Bottom Line: The weekly chart is in a bullish position and the allocation mix meter is at +100%.