After surging higher during the first half of Monday the market drifted lower during the rest of the day. Now the question is … is there more upside to come? New highs? Or was that it?
A bit strange is that a TD Sequential sell countdown completed yesterday. I use the word strange because it has laid dormant for quite a while. The TD Sell Setup that kicked it off registered back on July 9th (see chart). A more recent TD Sell Set-Up just completed (bar 9) last Friday. Precedence goes to the completed countdown because it’s associated setup is larger than the current setup. The associated risk level is at 1718.66 (solid horizontal cyan line). As usual, this is step one of my three step signal process (see posting on the August 31 weekly chart for an example).
Step 2 requires a technical signal. While the RSI (top pane) went to a new high yesterday the Composite Indicator (middle pane) drifted lower. This formation is not quite bearish divergence. Step 3 requires a price flip which has also not yet occurred.
As for the most recent sell setup, the associated risk level is at 1697.98 (horizontal dashed cyan line). It is interesting that we did not close above that level yesterday, ending at 1697.60 on the cash S&P500.
Bottom line: my view that we fail to make new highs, reverse and go on to make lower lows remains intact – but just barely. If yesterday marked an exhaustion event we should see some downside action today.
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