Daily Chart Recycles

The cash S&P500 resumed its rally without a price flip, moving above the 1692.51 level which gives us a new TD Setup which recycles our TD Combo and Sequential countdowns. Thursday represented Combo bar 10 and Sequential bar 6 based on the new active TD Setup (shown by the number 9 symbol on the price chart).

The DeMark recycle makes sense in a wave frame of reference also - it appears that we are now towards the end of wave 3 in a suspected five wave impulse sequence from the June 24th low. Note that Wave 3 is now equal in length to a 100% projection of Wave 1.

On the RSI chart (top pane) the indicator has poked to a new high for the move and is now above the 63-67 zone which often signals that a market is transitioning into a bear phase. At the same time the RSI is rising, note that the Composite Index (middle pane) continues to fall. In my ideal scenario going forward we get a fourth wave pullback and then the Composite forms bearish divergence with the RSI in the fifth wave as we reach a DeMark exhaustion signal. But for now, the daily chart must be deemed bullish.

A review of the weekly chart and Elliott wave musings this weekend. Cheers!

The Retest Continues ...

The daily chart is extremely interesting and subtle right now as we’ve moved sideways over the past few sessions just under the May high.

If the cash S&P500 closes below 1680.19 today (Thursday) then a price flip will be recorded that triggers the TD Sequential “sell” signal that printed bar 13 on July 8th. Instead, if the market resumes the rally without a price flip, any move above the 1692.51 level will give us a new TD Setup and recycle our sequential countdown. As reader Wallfly noted in a comment yesterday, a TD Combo bar 13 could print today giving us another item to watch for.

On the RSI chart (top pane) we have had a bearish divergence between the indicator and price. Please note that this divergence is occurring in the 63-67 zone which often signals that a market is transitioning into a bear phase. The Composite Index (middle pane) has now fallen enough where a turn up here *may* lead to divergence with the RSI.

An RSI Signal?

Price has finally turned down … but how significant is this turn?

If the cash S&P500 closes below 1675.02 today (Wednesday) then a price flip will be recorded that triggers the TD Sequential “sell” signal that printed bar 13 on July 8th. Instead, if the market resumes the rally without a price flip, any move above the 1692.51 level will give us a new TD Setup and recycle our sequential countdown.

On the RSI chart (top pane) we now have a bearish divergence between the indicator and price. Please note that this divergence is occurring in the 63-67 zone which often signals that a market is transitioning into a bear phase. However, this signal is tempered by the fact that the Composite Index (middle pane) made a new extreme high along with price. This is a warning signal that any sell-off may be shallow. Let’s see if we can trigger the sequential signal today.

A Retest of the High

The strong rally from the June low has continued unabated, broken through Fibonacci resistance and now challenges the all-time high in the cash S&P500.

It must be emphasized that the TD Sequential “sell” signal has not been triggered on this chart; a price flip being required after bar 13 was reached on July 8th. Now it must be noted that any move above the 1692.51 level will give us a new TD Setup and recycle our sequential countdown.

From a wave perspective … A move to a new high dramatically increases the odds that the action from May 22 is simply a corrective pattern in a larger upward trending pattern. I will take a look at the wave pattern over the coming days.

Weekly Chart Update for 12 July 2013

Unless the market reverses immediately the TD Combo 13 “sell” signal will be invalidated on this chart. Additionally, the Beta-X trendline is no longer acting as resistance to the price action.

However, the technicals associated with this chart are not promising for the longer run; at least for the moment. Note that even though price is now at its highest closing level, both the RSI (top pane) and Composite Index (middle pane) are not confirming. Of course, a continued rally may work off these divergences. We’ll have to see if that happens before price turns down again.

Bottom Line: I have been thinking that the May high will hold and that we are in the initial stages of a new equity bear market. Any move above the May high will prove me wrong although I would still believe that the risk of being a long-term equities investor here would be extremely high.