No Posting

Due to personal business there will be no postings from me over the next couple of days. I hope to get back on schedule by the end of the week.

Cheers,
Saxby

SPX Daily Chart - 1 July 2011

     Since my last daily update the cash SP500 has continued to move sharply higher. After reaching its sequential sell countdown, the hourly chart merely hesitated for five hours before resuming its march higher and validating a break above its risk level. We cleanly broke through resistance in the 1313-16 area and have closed above the Trend Factor (TF) target of 1338.12. While we wait to see if this break of the TF is validated (it is already qualified) there are two other items to watch to gauge if the bulls can continue their charge.
     The first is overcoming TDST resistance at 1345.20 (red horizontal dashed line). Second is the action of the RSI. Note that if this is only a corrective thrust on the daily chart then we should not break above the bear market resistance zone of 63-67.
      Bottom Line: The allocation mix meter is at +50%. The market was very strong last week and is close to my target of 1344. However, I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, I will be watching closely for any sign of a potential top as we move into July.

SPX Weekly Chart - 1 Jul 2011

     I certainly haven't foreseen how every squiggle in price action will develop and nor do I ever expect to. As a longer term investor I hope to catch the major turning points and long term trends. For nearly a month now I have been looking for the March lows to hold followed by a choppy rally back above 1344. Although the last few days have been anything but choppy, the cash SP500 has rocketed straight up, hitting 1341.01 on Friday and is now very close to the long mentioned 1344 level.
     The rally from the June 16 low on the daily chart is the "bounce" mentioned in yesterday's monthly chart discussion. It is developing according to the Price Pulse theory scenario outlined in my weekly chart posting for June 10. I repeat it here so you don't have to hunt for it:

     "Currently the weekly chart's price pulse scenario can be captured by these words from Tony Plummer's book "Forecasting Financial Markets: Technical Analysis and the Dynamics of Price" on page 109. "A short term sell signal is triggered as the x-wave falls below the bottom of the Beta-wave. However, the subsequent y-wave rally may abort the signal by rallying back above it; indeed, it may even  retrace close to the peak levels established by the alpha-wave and the delta-wave. A longer-term (or regenerated) sell signal is given when the z-wave penetrates below the bottom of the x-wave." The pulses are marked on the chart.
     I am expecting the y pulse (wave) to begin before the March low is broken and for it to rally above the peak of the alpha pulse but perhaps not the delta pulse."

     The 'x' pulse ended after reaching the Trend Factor target (1265.68) and the long term trendline (see chart). We broke below the Trend Factor target in a qualified manner the week before last but failed to close below it. This was a warning that the bulls might be able to hold and launch the "y" pulse rally. The break of the Trend Factor target was subsequently invalidated (proven false) last week when the bears failed to open the week below the 1265.68 mark. Additionally, the weekly RSI has turned up without dropping below the bull market support zone (38-42). Result? The 'y' pulse rally which has brought us very near the 1344 target. Now what?
     At this point there is no reason to abandon the price pulse model. Theoretically, the current 'y' pulse rally can move us to new highs but I don't expect that. Instead I will be watching for topping action before we reach the delta pulse high. Key will be resistance provided by the old sequential 13 risk level (shown by the horizontal cyan dashed line) at 1363.53 and the current supply line (the downsloping red dashed line). Let's see if the bulls can break them in a qualified manner and let's also see what the technical indicators look like if and when we get there.
    Bottom Line: The allocation meter is at +50%.  Monday is a holiday and so the next daily report will be Tuesday morning before the market opens.