Although the rally continues it has been a choppy affair that looks corrective to me. There are a couple of things I am watching here:
1) Interplay between price and the indicators. Both the composite index (middle pane) and RSI (upper pane) are ahead of price here. While the RSI is higher than it was on August 23, price is not. More concerning is that the composite is higher than it was on August 8th! Why the concern? As Connie Brown says in Technical Analysis for the Trading Professional, “You are on the wrong side of the market if the oscillators can move without prices following.” In fact, if these oscillators were to turn down from here we would have bearish negative reversals in place. We’ll have to watch and see what happens.
2) Price Pulse. The odds are high that the August 28th low marked the end of the Beta pulse and so we would now be in Delta. Under Price Pulse theory a failure of Delta to exceed the previous Alpha pulse high (1669.51) keeps the market bearish.
Bottom line: The daily chart remains bearish. Even if a stronger rally develops here I would expect it to fail to make new highs. We would then reverse and go on to make even lower lows.
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