Daily RSI Signals Bear Mode

Not much has changed over the past couple of days. I have added the TD Trend Factor target (purple line at 1614.62). Note it is in the SLOT (the 50-78.6% retracement area which I have drawn as a box on today’s chart) with the next larger Beta-X trendline (in orange). A close beneath this line will raise the chances significantly that the trending impulse pattern from last November is complete.

I am also watching for a possible bullish divergence between price and the RSI here. Any such development would mark the end of wave 3 or C from the August 2 high.

Another item of interest from the daily chart:

1) RSI (top pane). We have now had two readings below 38. This lends credence to the view that the August high completed a trending impulse pattern from November 2012 AND that the daily chart is in bear mode.

Bottom Line: The chart is bearish. Let’s see how it develops over the coming days.

The SLOT

The working hypothesis is that the August 2 high marked a significant top. I am quite convinced that it ended the rally from the June 24 low. Does it also mark the end of the trending impulse wave from the November 2012 low? Here are some sage words from blogger/trader Leaf West: “Traders know that calling tops is a mug’s game, and that they should always assume that as price pulls back from a new high, that support will hold in the SLOT and that a new high will be made. It is at the point in time when price bounces from support but fails to break to a new high, where traders can then point to that previous high in price and mark that as a more important top. Price should then be expected to make a bigger wave structure in the opposite direction from that confirmed top.”

In West’s work, the SLOT is the 50-78.6% retracement area which I have drawn as a box on today’s chart. Note that one of the features I track is in that box: The next larger Beta-X trendline. A close beneath this line will raise the chances significantly that the trending impulse pattern from last November is complete.

Other items of interest from the daily chart:

1) RSI (top pane). Two readings below 38 will also point to the August high as completing the pattern from November 2012. The RSI is currently at 35.29; marking the first reading below 38.

2) TDST support (1588). Will it hold?

3) Composite Index (middle pane). This indicator is now at an extreme low. This implies that the “final” low for this decline is not yet in. Expect a bounce followed by lower lows.

Bottom Line: The chart is bearish. Let’s see how it develops over the coming days.

Weekly Chart Turns Bearish

This chart is now bearish. After recording a TD Sequential countdown bar #13 on August 2, the cash S&P500 had bearish divergence between price and the RSI (shown in the last weekly chart posting). With the stage set, we had a price flip to trigger a “sell” signal this week. The associated “stop loss” (or risk) level is 1737.48 (horizontal cyan line).

I believe we have now completed an Alpha pulse (at the blue color level). On this chart, an even more bearish development would be the confirmation that the August 2 high also marked the green level Y pulse (and hence wave 5 in the trending impulse pattern from the November 2012 low). Currently it would take a move below the June 2013 low to get that confirmation. An “early warning” signal for this event would be a close below the Beta-X trendline shown in blue.

Finally, note that the June 2013 low must still be broken in order to show the TD D-Wave Triple Three count (presented in the recent series of wave postings) as complete. Please note that the wave count shown on the chart is not that D-Wave count but instead one based heavily on my price pulse work. I use the D-Wave count in a corroborating role.

With both the daily chart and weekly charts bearish, one should entertain a sharply reduced exposure to equities.