SPX Daily Chart - 28 July 2011

     The cash SP500 confirmed the break of the TD supply line (upsloping dashed green line) yesterday making the immediate target the TD Trend Factor shown on the chart at the 1281.06 level.
     On the hourly chart we began Thursday by completing a TD Buy Setup, but this only resulted in a bounce lasting a couple of hours before we sold off into the close. We ended the day testing TDST support at the 1300.01 level. Today the battle will continue to be over the July 18 low (1295.92) since a break of this level would confirm the level 2 (which aligns with the weekly chart) price pulse pattern we've been following (see last weekly chart update for details) and mean that the Z pulse is underway. If the bulls want to defend the July 18 low there is still an opportunity for them on the hourly chart. We have not yet confirmed the break of hourly TDST support nor broken the risk level of 1297.35 associated with the TD Buy Setup we completed at 10am Thursday.
     Also of extreme interest to me is what the RSI (top pane) will do here. Note that this indicator signaled a bear market from the May 2 high when it dipped below support on June 6. It then failed to clear resistance during the rally into the July 7 high warning that this move was a bear market rally. Now we are once again approaching the support level. Let's see if it can hold or not. I vote no.
     Bottom Line: The allocation mix meter remains at +50%. 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 confirmation that the July 7th high was the top of a counter trend rally.

SPX Daily Chart - 27July 2011

     After attacking resistance during the sessions of July 21-23, the bulls failed and were turned back. The initial decline from the failed resistance zone was mild but picked up steam yesterday. Price of the cash SP500 not only formed another downtrending price bar but also broke through the TD supply line (upsloping dashed green line) in a qualified manner. If the break of that line is confirmed today then the immediate target is the TD Trend Factor shown on the chart at the 1281.06 level.
     From here the bulls don't want to see the July 18 low (1295.92) taken out since this would confirm the level 2 (which aligns with the weekly chart) price pulse pattern we've been following (see last weekly chart update for details) and mean that the Z pulse is underway. If the bulls want to defend the July 18 low there is an opportunity for them on the hourly chart. We potentially can complete a TD Buy Setup at 10am this morning very near current TDST support at the 1300.01 level.
     Bottom Line: The allocation mix meter remains at +50%. 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 confirmation that the July 7th high was the top of a counter trend rally.

SPX Daily Chart - 26 July 2011

It was a fairly quiet session yesterday with the cash SP500 forming a downtrending price bar. After being turned back by a combination of daily (1345.20) and hourly (1343.78) TDST resistance the market has only drifted lower over the past few sessions. This lackluster decline makes me wonder if the failure at resistance was really the warning that the delta pulse is running out of steam like I thought it was. If so, then last Thursday's high should not be exceeded in the near term.
     On a hourly basis the first level of support is at 1324.93. The inability of the bears to get price below this level will make me further question whether the bulls have thrown in the towel. However; those bovine must still prove their case by getting through (in a qualified and confirmed manner) both the supply line (down sloping red dashed line) and TDST resistance on the daily chart.
     Bottom Line: The allocation mix meter remains at +50%. 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 confirmation that the July 7th high was the top of a counter trend rally.

SPX Daily Chart - 25 July 2011

     For the cash SP500, both daily (1345.20) and hourly (1343.78) TDST resistance continues to hold back the market. The daily break of the TDST line (horizontal, dashed red line on the chart) was not confirmed on Friday since we opened below the line. This failure was evident in yesterday's down trending price bar. I interpret this failure as a warning that the delta pulse is running out of steam. If so, then last Thursday's high should not be exceeded in the near term.
     On a hourly basis the break above 1343.78 on Friday was not qualified and we had a bearish price/RSI divergence at the 1pm hour. This technical weakness also preceded yesterday's decline.
     Now, the onus is on the bulls. They must prove their case by getting through (in a qualified and confirmed manner) both the supply line (down sloping red dashed line) and TDST resistance on the daily chart. If they can do so I will sit up and notice!
     Bottom Line: The allocation mix meter is at +50%. 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 confirmation that the July 7th high was the top of a counter trend rally.

SPX Weekly Chart - 22 July 2011

     When sell sequential bar #13 recorded on February 18, 2011 the cash SP500 closed at 1343.01. On Friday we closed at 1345.02. Certainly we can agree that the last weekly sequential signal has led to a market consolidation (which has now lasted 22 weeks). Last week I said that the "generally sideways movement would continue" for a couple more weeks. Since last week ended higher, I guess that means this week must go lower! Is there support for this in the weekly chart? Let's take a look.
     After qualifying and confirming a break through the short (red) moving average the cash S&P's found support at the medium (blue) moving average (via an unqualified break) and rallied nicely last week. Now the TD Supply line (dashed red) looms overhead at 1351.78 this week. Unless we open above that level today we will not be able to qualify an upward break of that line this week; which tells me to anticipate supply entering the market. I also come to that conclusion when I see the RSI (top pane) continually losing strength while prices consolidate. For the bulls the moment of truth is at hand. The Derivative Oscillator (middle pane) slipped below zero shortly after the sequential signal was given in February and has stayed below it since. 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?
     I think we might very well do so; if only because the action continues to develop according to the Price Pulse theory scenario outlined in my weekly chart posting for June 10. I repeat that 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."
     Bottom Line: At this point there is no reason to abandon the price pulse model. The current 'y' pulse rally can move us to new highs but I don't expect that. Key will be the old sequential 13 risk level (shown by the horizontal cyan dashed line) at 1363.53 and the current supply line already mentioned. The allocation meter remains at +50%.