SPX Daily Chart - 2 June 2011

     Yesterday the close below the long (green) moving average was confirmed but we did not close below TDST support. If TDST support (1312.62) can't hold the next downside support is at 1285.54 (TD Trend Factor). Recall from Tuesday's weekly post that we had a weekly TD Demand line break with a calculated objective of 1282.73. The weekly medium moving average sits at 1284.43 this morning.
     The cluster of targets in the 1282-1286 zone are concerning since I have been expecting the 1294.7 level to hold. And that is why today's action continues to be so important for the bullish case. There are reasons to believe it can hold: Daily RSI still holding bull market support zone; Price acceleration down since the May 31 high not being matched by the derivative oscillator; the composite index & derivative oscillator not at new lows like price or RSI; a TD Buy setup completed at the low on yesterday's hourly chart; and there was a bullish RSI/Price divergence at yesterday's low on the 15 minute chart. However; even with all of those 'possible' supporting technicals, we still need to see TDST support hold.  Remember that a close below 1312.62 must be confirmed before we claim it has been broken.
     Bottom Line:  The allocation mix meter remains at +100%.  I am still expecting to see new highs before the April low is violated. If I am wrong the mix meter immediately goes to +50% on a break below 1294.7.

SPX Daily Chart - 1 June 2011

     After holding TDST Support (1312.62) on the daily chart last week, the cash SP500 bounced through the short (red) and medium (blue) moving averages as well as the TD Supply line (downsloping dashed red line). However, none of these upside line breaks were qualified and we sold off sharply yesterday.
     Yesterday's sell off also saw a qualified break of the TD Demand Line (upsloping dashed green line). Today my technical focus will be on whether that break (as well as the close below the long; green, moving average) is confirmed and whether we close below TDST support or not. If these levels can't hold the next downside support is at 1285.54 (TD Trend Factor). Recall from Tuesday's weekly post that we had a weekly TD Demand line break with a calculated objective of 1282.73. The weekly medium moving average sits at 1284.48 this morning.
     The cluster of targets in the 1282-1286 zone are concerning since I have been expecting the 1294.7 level to hold. And that is why today's action is so important for the bullish case. Let's see if we can hold TDST support over the next two days. Remember that a close below that level must be confirmed before we claim it has been broken.
     Bottom Line:  The allocation mix meter remains at +100%.  I am still expecting to see new highs before the April low is violated. If I am wrong the mix meter immediately goes to +50% on a break below 1294.7.

SPX Monthly Chart - May 2011

     On a monthly basis the cash SP500 formed another uptrending price bar in May. After completing a TD Combo countdown to bar #13 in February we have yet to have the price flip required for an actual sell signal. Such a flip would occur in June if we were to close the month below 1327.22. Also note that we are now at a sequential countdown bar #11 and have made a sell setup bar #9. All of this data show the market inching closer to a sell signal - but it hasn't happened yet.
     Continuing to be of extreme importance on the monthly chart are the 1403.03 and 1404.05 levels. If price exceeds the former number then any and all Combo or Sequential signals will be held in abeyance. If price exceeds the latter number in a qualified manner then we know that the rally from the March 2009 low is not just a counter-trend rally (as defined by TD concepts). Using the RSI (top pane) as a trend indicator we can see that a bear market was signaled on this time frame in September 2008. Of great interest is that we continue right in the area reserved for bear market resistance. That is, this indicator is saying that if the rally from 2009 is corrective in nature we have about run out of steam. A move above 67 in the RSI is equivalent in meaning to a qualified break of 1404.05. The new setup bar #9 implies that we should have resolution of this bull/bear tension by the Autumnal Equinox.
     Another worrisome (but not yet fatal) development on the monthly chart is the turn down in the Derivative Oscillator (middle pane). First note the developing bearish divergence with price beginning now. Then notice the 'failure at the zero line' (indicated by the arrow) that was formed by this indicator in September 2010. That failure, along with the sharp fall from an extreme reading in December 2009 while prices only moved sideways, was a warning at the time for a sharp rally. That rally has occurred and now the developing bearish divergence should be cause for concern.
     Finally, let's see what the TD Demand Line (dashed upsloping green line) has to offer. 1338.35 is the key number in June. A break below that level would be a qualified break of the Demand Line, indicating that we can expect June to close below that level with a calculated objective of 1276.35. Meeting such an objective would certainly raise the odds of a June price flip.
     Bottom Line: Although risk is growing, the monthly chart remains in a bullish position at this moment. Developments on lower level time frames need to be watched closely as to anticipate developments on the June monthly chart.

Chuck's Waves - World Gold Index

SPX Weekly Chart - 27 May 2011

     We broke the TD Demand Line (upsloping green line) in a qualified manner this past week by opening below 1340.35. This break increased the odds that we would close below that line on Friday and indeed we have. Such a qualified break gives a minimum objective of 1282.73 to the downside. Note that the medium (blue) moving average will be near this level next week. I am not predicting this objective will be met, only that it is a high probability target should the short (red) moving average fail to contain this decline.
     For me, the primary working point on this chart continues to be the qualified break (April 29) above the risk level of 1363.53. Since then the market has slumped and the question is whether we had a false breakout. My working hypothesis has been "no"; that we will see new highs without breaking below the 1294.7 level (the April 18 low).
     Why would the short moving average hold? The fact that we have failed to close below it for two weeks is not proof that it will continue to hold. A primary reason for my opinion is that the monthly chart is still positive. With a still-bullish higher time frame I prefer to view the RSI (top pane) in a positive rather than negative fashion. Instead of relying on possible bearish divergence, I am focusing on the still valid positive reversal (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. If the RSI breaks below the blue line defining the positive reversal it will be negated.
     Bottom Line: The weekly chart is in a bullish position and the allocation mix meter is at +100%. Although currently still expecting new highs there are clear events that would tell me I am most likely wrong; a breakdown in the RSI, a close below the short moving average and, primarily, price violating the 1294.7 level.