Fox Market View

SPX Wave Count 27 Jan 2012

2012-01-30T05:56:00.000-08:00

SPX Wave Count 24 Jan 2012

2012-01-25T03:10:00.000-08:00

SPX Wave Count 9 Jan 2012

2012-01-10T03:52:00.000-08:00

SPX Daily Chart 3 Jan 12

2012-01-04T05:42:00.000-08:00

SPX Daily Chart 28 Dec 11

2011-12-29T02:42:00.000-08:00

SPX Elliott Wave Count 23 Dec 11

2011-12-24T02:19:00.000-08:00

2011-12-20T09:51:00.000-08:00

SPX Wave Count for Dec. 13

2011-12-14T07:43:00.000-08:00

Daily Wave Count 7 Dec 2011

2011-12-08T04:45:00.001-08:00

Daily Wave Count 1 Dec 11

2011-12-02T02:46:00.001-08:00

Blog Suspended

2011-09-26T04:11:00.000-07:00

Things have become a bit too hectic for me of late and so this blog is being suspended.

Saxby Fox

SPX Daily Chart - 22 Sep 11

2011-09-23T04:07:00.000-07:00

     A retest of the Beta pulse low is now underway in the cash SP500. After yesterday's sell off it is extremely unlikely that last week's break out on the weekly chart will be confirmed. This comes on the heels of the RSI/Composite bearish divergence on the daily chart.
     As mentioned yesterday, the retest of the Beta pulse low may result in yet another bounce attempt. However, since the Beta low was actually broken, the price pulse model is now negative. Surprisingly I am beginning to see hints of bullishness appear! The first was cited yesterday on the daily REI. It showed the likelihood that we would bounce upward after the test of the beta low. Now I want to also point out that the RSI is at a critical juncture as it tries to hold the area reserved for support in bull markets. Even if it can't hold there today it is possible that a bullish divergence may form with the August 22 low on any close below 1123.53. Finally, today may turn out to be bar 12 of a daily sequential buy!
    Bottom Line: My current idea is that the break of 1136.07 signals that the downtrend has resumed. Am I being too hasty in this decision? Perhaps the real retest is of the August low (previous x pulse bottom)? Today will give us more information, as will the new weekly chart. For now my mechanical allocation mix meter has fallen to 25%.

SPX Daily Chart - 21 Sep 11

2011-09-22T03:29:00.000-07:00

     After yesterday's sell off it might seem that the RSI/Composite bearish divergence and the weekly chart analysis of "the downtrend being close to resuming" was reasonable. In fact, note that we are on the verge of not confirming the weekly break out (see the weekly post). This also seems to put the odds in favor of the bearish case.
     And although I think the bearish position will be right over the coming weeks I am not convinced that the bottom will fall out here - if only because the daily REI is showing a strong up trend from the Beta bottom. But maybe this is just a reflection of typical delta pulse strength? Possible delta pulse strength means that a retest of the Beta pulse low may result in yet another bounce attempt. It will be critical to see if the Beta low is actually broken. If it is, then even if we get a bounce (even as far as the 1245-47 area), we can anticipate that lower lows are likely ahead of us.
    Bottom Line: I think the bounce/consolidation from the August low is either running on fumes or over. A break of 1136.07 will convince me that the downtrend has resumed - even if another bounce up ensues. My mechanical allocation mix meter is at +50% but would drop to 25% on a break of that 1136.07 level.

SPX Daily Chart - 20 Sep 11

2011-09-21T04:00:00.000-07:00

As far as my analysis methodology goes, yesterday's price action did nothing but mark time. The next upside target area is 1245-47. It is interesting to note that at this level delta will equal alpha in length.
Bottom Line: I think the bounce/consolidation from the August low is running out of steam. A break of 1136.07 will convince me that the downtrend has resumed. My mechanical allocation mix meter is at +50%.

SPX Daily Chart - 19 Sep 11

2011-09-20T04:04:00.000-07:00

     The ongoing bounce/consolidation in the cash SP500 was given a warning blow yesterday when the Composite Index (middle pane) bearishly diverged with the RSI (top pane). This divergence warning is not foolproof; but when combined with the conclusions reached from the weekly analysis it seems likely that the downtrend is close to resuming.
     While we watch for other confirming evidence that the bounce is complete, keep in mind that we are now in a delta pulse. Not only is Delta usually the strongest upward pulse in a cycle, it is the primary place where divergences of the sort just mentioned are prone to fail. Nevertheless, if this delta pulse turns out not to be stronger than the preceding alpha it is another bearish warning. The next upside target area is 1245-47. It is interesting to note that at this level delta will equal alpha in length.
    Bottom Line: I think the bounce/consolidation from the August low is running out of steam. A break of 1136.07 will convince me that the downtrend has resumed. My mechanical allocation mix meter is at +50%.

SPX Weekly Chart - 16 Sep 11

2011-09-19T03:59:00.000-07:00

     It was a strong week for the cash SP500 as both the long (green) moving average and supply line (red dashed) were broken in a qualified manner. If those breaks are confirmed this week then the bounce from the August low is alive and well. However, as before, I think that the short (red) or medium (blue) moving averages is the best we might get before the larger downtrend asserts itself.
     Besides the reasons spelled out last week, another piece of evidence supporting an ultimately bearish resolution is the REI indicator shown in the top pane. The fact that the REI has been oversold (below the bottom blue line) for six weeks now indicates a trending market. In such a case we should look for the downtrend to reassert itself with a new low being made over the coming few weeks.
     Bottom Line: For this week it will be important to see if we get confirmation of the upside breaks of the long (green) moving average and the supply line (dashed red line). A failure to confirm would be bearish. The allocation meter is at a +50% and I am expecting the August low to give way after this consolidation/bounce completes.

SPX Daily Chart - 15 Sep 11

2011-09-16T04:51:00.000-07:00

     The bulls continue to press the cash SP500 higher, overcoming key resistance at the 1186 level. Does this mean all is rosy? Not necessarily. Take a look at the composite index (middle pane). While the RSI (top pane) has pushed to a new high here the composite is lagging. Should this turn in to an actual divergence a warning would be given that the bounce/consolidation from early August is complete.
     While we watch those two indicators note that we are now in a delta pulse. Delta should be the strongest upward pulse in a cycle. If it is not that is another bearish warning. The next upside target area is 1245-47.
    Bottom Line: Until further evidence develops or we break 1136.07, I think that the bullish potential over the near term should be respected. My mechanical allocation mix meter is at +50%.

SPX Daily Chart - 14 Sep 11

2011-09-15T03:24:00.000-07:00

     An impressive showing for the bulls as they were able to push the cash SP500 over, and then close above, key resistance. That resistance at 1186 was composed of the medium (blue) and short (red) moving averages as well as the TD Supply line. There was a downside though: the break was an unqualified one. This means that we need to be suspicious of this being a false breakout.
     So once again we want to see if the bulls can provide follow through to the upside. Their immediate goal is to break 1204.40 to indicate that the delta pulse is underway. The next upside target would be 1245-47. If the bulls can't follow through then we will have to watch what happens at the demand line (horizontal dashed green line).
    Bottom Line: Until further evidence develops or we break 1121.09 I think that the bullish potential over the near term should be respected. My mechanical allocation mix meter is at +50%.

SPX Daily Chart - 13 Sep 11

2011-09-14T02:50:00.000-07:00

There was follow through to the upside in the cash SP500 yesterday but it certainly was not remarkable. The focus for the bulls (besides seeing more follow through) must be the strong resistance forming in the 1186 area composed of the medium (blue) and short (red) moving averages as well as the TD Supply line. This is formidable resistance and whether it can be overcome may be the tell on whether the consolidation from early August is over or not.
Bottom Line: Until further evidence develops, or we break 1121.09, I think that the bullish potential over the near term should be respected. My mechanical allocation mix meter is at +50%.

SPX Daily Chart - 12 Sep 11

2011-09-13T03:08:00.000-07:00

     The fight continues over whether the consolidation/bounce is over in the cash SP500. The price action over the last two sessions has confirmed that the alpha-pulse ended at the August 31 high. The price pulse model says that the bulls have most likely failed if we break below the August 22 low of 1121.09.
    If you are bullish near term (like I am) the good news is that the intraday break of the TD Demand line yesterday was unqualified - demand did come into the market at that level. Now we need to see some follow through. Another thing to worry about (besides seeing follow through) is the strong resistance forming in the 1185-1194 area composed of the medium (blue) and short (red) moving averages as well as the TD Supply line.
     I think the fight today will again be over: 1) keeping the daily RSI above the 38 level; and 2) the TD Demand level (upsloping dashed green line).
     Bottom Line: Until further evidence develops or we break 1121.09 I think that the bullish potential over the near term should be respected. My mechanical allocation mix meter is at +50%.

SPX Weekly Chart - 9 Sep 11

2011-09-12T02:55:00.000-07:00

     Recent review of the monthly chart showed an overall bearish position for the cash SP500 while the daily showed that a choppy counter-trend rally has further to go. What does the weekly chart have to say?
     In my last weekly posting (26 Aug) I stated that an A-B-C or 1-2-3 structure has formed from the May 2011 high. The first two D-Waves (either A-B or 1-2) correspond (in this particular instance) to the x and y pulses shown on the chart. The strong decline from July 8 to August 12 has been with the Z-pulse of the price pulse model. Recall that the Z-pulse often contains the sharpest declines as the Delta-pulse often contains the largest rallies. Since the RSI has broken below 38 I favor the bear market 1-2-3 D-Wave count. Is wave 3 in this model over? Technically no. The fourth D-wave can only be said to be underway when we see a high greater than the previous 12 highs.
     The implication is that D-wave 3 has more to go to the downside, and that the price action since the z-pulse bottom is just a bounce or consolidation. Note that the low of August 12th came right at the 38.2% retracement level of the 2009-2011 rally. One week later the RSI (top pane) bounced off of the level reserved for support in bear markets and the Composite indicator (middle pane) made bullish divergence with the RSI. This is the evidence that supports that a bounce or consolidation is in fact underway. And this interpretation fits the monthly and daily scenarios we have been discussing. The price action in this bounce/consolidation is an alpha pulse on the weekly chart.
     Going forward we can use the price pulse model to gauge when the bounce/consolidation (if it is solely associated with just the alpha pulse) might be over. Right now it would be signaled on any move below 1121.09; which was also important in the daily chart. To the upside I think the short (red) or medium (blue) moving averages is the best we might get before the larger downtrend assert itself.
     Bottom LIne: For this week I think the levels to watch are the long (green) moving average and the Demand Line (dashed green line). Qualified, confirmed breaks of these lines would point to; respectively, either a bounce (vice consolidation) or renewed decline. The allocation meter is at a +50% and I am expecting the August low to give way after this consolidation/bounce completes.

SPX Daily Chart - 8 Sep 11

2011-09-09T04:56:00.000-07:00

     We are being squeezed between two moving averages. Which way will we break?
     In the last daily update (1 September) we saw the cash SP500 react downward after reaching the medium (blue) moving average. We then barely held contact with the short (red) moving average. From the short moving average I was expecting that we would reach for an even higher target. However, we reacted negatively once again to the medium (blue) moving average yesterday which is now parallel to the TD Supply line. And once again -- down to the short moving average. What now?
     At this point I still think the bulls have unfinished business to the upside. That said, I think the fight today will be over the weekly price flip point of 1178.81 and keeping the daily RSI above the 38 level. A failure to do either will lead to a test of Demand (upsloping dashed green line) and the September 6 low. The price pulse model says that the bulls have failed if we break below the August 22 low of 1121.09.
     Higher targets include: 1245-1247 fibonacci and Trend Factor targets, the long (green) moving average and TDST resistance at 1332.
      Bottom Line: I believe a counter-trend rally is underway from the early August low; albeit quite a choppy one. My mechanical allocation mix meter is at +50% - yesterday's post of 25% was in error. Until further evidence develops or we break 1121.09 I think that the bullish potential over the near term should be respected.

SPX Monthly - August 2011

2011-09-08T02:59:00.000-07:00

     I am making good progress on recovering from a major computer crash. To get back into the swing of things, here is a quick update to the monthly chart.
     It was quite a volatile month! It also nicely shows why I follow the moving averages I do. The low of the month was nearly identical to the medium (blue) moving average and the close nearly identical with the long (green) moving average. Beyond that interesting point I can only say that this chart is currently bearish - which occurred when the Beta-pulse low at 1249.05 was broken. We are now in the downward moving X-pulse; the delta high occurring at the May high. This price pulse bearish development comes after the June price flip that cemented the TD Combo sell countdown in Februray. Note that this was also the first price flip after a sell setup bar #9 in May.
     Going forward there are a couple of things to watch for:
     (1) Will the decline make a qualified and confirmed break of TDST Support at 1049.33? After a Combo signal this should happen if the trend has really changed. Otherwise we are just in a correction to a larger uptrend.
     (2) Will the RSI hold above the zone reserved for bull market support (38-42)? As in (1) above, a break of this zone would confirm a trend change. Otherwise we are just in a correction of a larger uptrend.
    (3) Will the long and short (red) moving averages act as resistance?
    (4) Will the Supply Line (downsloping red dashed line) act as 'ultimate' resistance? The price pulse theory says this market is bearish unless the delta pulse high is broken.
     Bottom Line: in my asset allocation work this time frame is on a "sell" signal. Only the quarterly and daily charts are positive at this point and so the allocation mix meter is at 25%.
     Back to the daily chart tomorrow.

Computer Crash!

2011-09-06T17:11:00.000-07:00

I had a major crash of my computer system which is taking me quite a long time to fix. I still haven't recovered all of my past work and data -- hopefully that will come over the next couple of days. Once that milestone is reached I will resume posting. Thanks for your patience.

Saxby

SPX Daily Chart - 1 September 2011

2011-09-02T03:01:00.000-07:00

     The cash SP500 reached the medium (blue) moving average and we are now seeing a reaction to that level. Without a signal in the technical indicators my only conclusion is that we will only see a consolidation or pullback to the short (red) moving average here before we reach for an even higher target.
     Those higher targets include: 1245-1247 fibonacci and Trend Factor targets, the long (green) moving average and TDST resistance at 1332.
      Bottom Line: I believe a counter-trend rally is underway from the August lows. My mechanical allocation mix meter has risen to +50% - the bullish potential over the near term should be respected.

SPX Daily Chart - 31 August 2011

2011-09-01T02:23:00.000-07:00

     The cash SP500 reached the medium (blue) moving average yesterday. Will there be a reaction here? The early read of the technicals say that if there is, it will only be a hesitation, and that a higher target will be reached for.
      The price targets to watch are: The medium (blue) moving average, 1245-1247 fibonacci and Trend Factor targets, the long (green) moving average and TDST resistance at 1332.
      Bottom Line: I believe a counter-trend rally is underway. My mechanical allocation mix meter has risen to +50% - the bullish potential over the near term should be respected.

SPX Daily Chart - 30 August 2011

2011-08-31T03:09:00.000-07:00

     After making an x-pulse low at a TD Buy Setup, the cash SP500 bounced in a y-pulse. The low was then successfully retested on August 19/22 when the z-pulse did not make a new low. A price pulse "buy" signal then confirmed the previous buy setup when we had a confirmed break of the supply line (delta - y trendline) on August 29. Yesterday the rate of advance was much slower but the market traced out an uptrending bar.
      The price targets to watch are: The medium (blue) moving average, 1245-1247 fibonacci and Trend Factor targets, the long (green) moving average and TDST resistance at 1332.
      Bottom Line: I believe a counter-trend rally is underway. My mechanical allocation mix meter has risen to +50% - the bullish potential over the near term should be respected.

SPX Daily Chart - 29 August 2011

2011-08-30T03:04:00.000-07:00

     When we last left the daily chart (16 August) I thought that we needed to retest demand (the low) again before a sustained bullish rally can get underway. That retest occurred on August 19/22 and was turned out to be successful. As noted yesterday it came in conjunction with a bullish divergence between the RSI and composite index on the weekly chart. Then, after an unqualified break of the daily supply line (downsloping red dashed line) on august 24, we had a qualified break on the 26th which was confirmed yesterday. The magnitude of this supply line break is such that a substantial retracement rally is possible although not necessary.
     Also note that yesterday's price action means that an A-B-C pattern may have completed on the daily D-wave chart. Just another reason to respect the bullish potential over the short term.
     There have also been developments in the price pulse as the x, y and z pulses have been confirmed complete. In this instance the buy signal matched the supply line already mentioned. With a buy setup in place (on August 9) the confirmed break of the supply line (delta - y trendline) raises the allocation mix meter to +50%.
      With that being said, the weekly chart hints that this is only a counter-trend rally. Thus the idea is to identify targets on the daily chart and watch for a reaction and confirming technical signals. Those targets are: The medium (blue) moving average, 1245-1247 fibonacci and Trend Factor targets, the long (green) moving average and TDST resistance at 1332.
      Bottom Line: I believe a counter-trend rally is underway. My mechanical allocation mix meter has risen to +50% - the bullish potential over the near term should be respected.

SPX Weekly Chart - 26 August 2011

2011-08-29T02:07:00.000-07:00

     Stepping back for a minute .... if we are not going to new all time highs in this rally that started in 2009, then we are in a "B" wave on the D-Wave Quarterly chart. The monthly chart shows that a possible A-B-C sequence has completed at the May 2011 high. This zig-zag interpretation is favored since the monthly RSI topped out in the zone reserved for bear market resistance. With that assumed background, the weekly chart shows that an A-B-C or 1-2-3 structure has formed from the May 2011 high. These D-Waves match (in this particular instance) the price pulse x and y pulses shown on the chart. Since the RSI has broken below 38 I favor the bear market 1-2-3 D-Wave count.
     Note that the May 2011 high was associated with the failure to make a qualified break of the risk level associated with the completed sequential sell countdown of February 18, 2011. In retrospect, this analysis results in viewing the five months from February 18th to July 22nd as topping action. Since then we have confirmed the the break of weekly TDST support (horizontal dashed green line) at 1219.50. This strong market decline has been the Z-pulse of the price pulse model. Recall that the Z-pulse often contains the sharpest declines as the Delta-pulse often contains the largest rallies.
     Simply put, the cash SP500 is now in a bear market at this time frame. Note that the low of August 12th came right at the 38.2% retracement level of the 2009-2011 rally. One week later the RSI bounced off of the level reserved for support in bear markets and the Composite indicator made bullish divergence with the RSI. This suggests either a bounce or consolidation is underway. I favor the consolidation scenario in a D-wave fourth wave.
     Bottom Line: At this time I think the levels to watch are the long (green) moving average and the Demand Line (dashed green line). Qualified, confirmed breaks of these lines would point to; respectively, either a bounce (vice consolidation) or renewed decline. The allocation meter is at +25% and I am expecting the August low to give way after this consolidation/bounce completes.

SPX Daily Chart - 16 August 2011

2011-08-17T01:22:00.000-07:00

     Since the August 9 low we have been tracking a rally in the cash SP500 from the deeply oversold condition it found itself in coincident with a TD Buy Setup. Yesterday the market opened right at the short (red) moving average and the risk level (1204.08)associated with the sell setup on the hourly chart. These two factors acted as expected - resistance. The question now is whether they also marked an end to the rally and the beginning of a retest of the low.
     One tool useful in deciding if the retest is "on" is the Range Expansion Index (REI) shown in the top pane of today's chart. Since the index moved above the overbought level (horizontal blue line) Monday with a higher close, a sell signal will now be triggered with a break of 1178.86. Note that this is generally the previous resistance area provided by TD Trend Factor and the fibonacci level. If previous resistance doesn't become support it is a sign of a weak market. This level did provide support yesterday. If the bulls can continue to hold this level and then get through the short moving average the door is open to 1245.
      Bottom Line: I favor the bearish case here and believe that we need to retest demand (the low) again before any sustained bullish rally can get underway. The current demand line (dashed green line) reflects the "retest level" well. The allocation mix meter remains at +25%.
     Note: I will not be posting until August 28 - vacation time!

Investigations - Part 4

2011-08-16T09:18:00.000-07:00

Note: It may help to refer to the previous postings in this series.

     This infrequent series of postings has been examining two questions. The first is whether one can tell (at the time it is occurring) whether trend exhaustion will result in either 1) just a correction (pullback or consolidation); or 2) in a full change in trend. To help answer that question we started using D-wave analysis to investigate whether impulse waves 1, 3, and 5 at one time frame are composed of a full five wave impulse sequence on the next lower time frame. For instance, we saw that Quarterly wave 3 (D.3) was, on the monthly chart, composed of a complete five wave sequence from the late 1982 low up into the high of 2000. However; since this five wave sequence "nested" within a quarterly chart "third wave" and not a "fifth wave", the implication was that a trend change would not occur - only a correction associated with the quarterly fourth wave (D.4). The change in trend would have to wait until the completion of a full five wave sequence at the quarterly level.
     Does this same nesting characteristic show up in quarterly wave D.1 which began at the 1974 low? Yes. You can start a monthly sequence here for two reasons. The primary one being that the higher (quarterly) wave began here. Secondly you may note that the 1974 low (60.96 in in October) is a 21 period low. The analysis then reveals D1 at the 1977.1 (January) high; D2 at the 1978.3 (March) low; D3 at the 1980.2 high; D4 at the 1980.3 low; and D5 at the 1980.11 high. And so, as with quarterly wave D.3, quarterly wave D.1 is composed of five waves on the monthly scale.
     What should we expect during a correction? Will there be a full A-B-C wave structure? That is, will the corrective wave structure "nest" within the higher time frame's single corrective wave? Examining D-wave 2 (D.2) on the quarterly chart. With this wave, the answer is 'no'. The monthly chart only shows one wave down. How then do we know that the corrective sequence is over? The authoritative indication is when the quarterly chart fulfilled the requirement for D.3 to be underway, and in my work that is a high greater than all previous 20 price bars.
     At this point our theory concerning D-waves is that impulse waves sub-divide into five's and corrective waves into one or more waves. Without a definitive number of D-waves in a correction we may want to supplement what we mean by a correction in terms of other tools. One example is to use TDST support and resistance levels. With regard to the quarterly chart, if we were only expecting a correction (pullback or consolidation) from the year 2000 high, then the TDST support level (733.54 at the time) would be expected to hold. Indeed it did, as the accompanying chart shows.
     Next time I want to investigate the decline (Quarterly D.4) from the 2000 high on the monthly chart.
     To Be Continued ....

SPX Daily Chart - 15 August 2011

2011-08-16T04:10:00.000-07:00

     On Monday the cash SP500 continued its rally from the deeply oversold condition it found itself in at the August 9th low. This low was in conjunction with a TD Buy Setup. My take continues to be that this rally will end at/near a fibonacci/moving average/TD Trend Factor target and will be followed by a retest of the low.
     Our initial target zone in the 1180 area was reached but only managed to cause a hesitation in price before we rallied through it yesterday. However, this break-out was not confirmed (although qualified) and could be a signal that the next target could prove fatal to the bull case. That next 'target' was the 1215 area yesterday since the short (red) moving average was sinking towards the fibonacci level there. For today that moving average will be even lower, about where we closed yesterday. Therefore the bulls will have a large test today right from the open. In conjunction with this is the test of the risk level associated with the sell setup on the hourly chart. We finally broke above that level (1204.08) in a qualified manner at the close yesterday. However, an open this morning below that value will be non confirmation and may spell trouble. On the other hand, if the bulls can 'pass' this test the door is open to 1245.
      Bottom Line: I still believe that we will need to retest demand (the low) again before we can get a sustainable bullish rally. The current demand line (dashed green line) reflects the "retest level" well. For now however, we need to watch how price reacts at the short moving average and hourly sell setup risk level this morning. Failure would be a clear indication that the oversold bounce may be completing. The allocation mix meter remains at +25%.
   Note: I will not be able to post August 18-26.

SPX Weekly Chart - 12 Aug 2011

2011-08-15T02:58:00.000-07:00

     Although we finished well off the lows it was another downtrending week in the cash SP500 market as we confirmed the the break of TDST support (horizontal dashed green line) at 1219.50. This strong market decline has been the Z-pulse of the price pulse model. Recall that the Z-pulse often contains the sharpest declines as the Delta-pulse often contains the largest rallies.
     Simply put, the market is now in a bear market on this time frame. Note that the low last week came right at the 38.2% retracement level of the 2009-2011 rally. Of interest now are the technical indicators. Compared to the RSI (top pane), the Composite Index (second pane) and Derivative Oscillator (third pane) are threatening to make bullish divergence. Threatening is the key word. These divergences are not yet in place.
     Bottom Line: At this point there is no reason to rush into any new judgments abut the medium term outlook. The allocation meter is at +25%.
     Note: I will not be posting 18-26 August.

SPX Daily Chart - 11 August 2011

2011-08-12T02:33:00.000-07:00

     Ignoring the volatility, a key aspect of the last few sessions has been the fight over the risk level (1127.87) associated with the sequential buy signal on the hourly cash SP500. At Wednesday's close we had a qualified break below this level but the bulls regrouped overnight and were able to hold at the open on Thursday. This led to the break being unconfirmed and another thrust upward. Price then reached our initial target zone during the closing hour.
     I still believe that we will need to retest demand (the low) again before we can say that a sustained bullish rally is underway - - and the current demand line (dashed green line) reflects this well. For now however, we need to watch how price reacts at each of the target zones. Yesterday's break above the zone around 1180 (fibonacci and trend factor) was qualified. Let's see if we can confirm it today. I need to add the 1215 area to the list of resistance levels as the short (red) moving average is sinking towards it. Right above that is still the target at about 1245.
      Bottom Line: The allocation mix meter is at +25%. Watching for the bounce to hit resistance which will lead to a retest of Tuesday's low.

GLD Weekly Chart

2011-08-10T01:59:00.000-07:00

      Like the Quarterly and Monthly charts presented previously, the weekly chart is in a bullish position. Starting from the 2008 Wave IV low (as analyzed on the monthly chart) we can see that the weekly is in the D-wave 5 position of an upward trend. The next chance of an exhaustion signal associated with that fifth wave would be a new sell setup. We are working on bar #6 of such a setup this week.
     Finally, price pulse theory states that we need to watch for a break of the Beta - X trendline here before deeming this chart as bearish. That trendline is shown by the bold orange line and is generally running parallel to the moving averages.
     Bottom line: Adding this chart to the mix produces an allocation reading of +75%. Only the daily chart is left to go. Look for that over the next few days.

SPX Daily Chart - 9 August 2011

2011-08-10T01:53:00.000-07:00

     The bounce is underway; and there is really not much to add in the way of commentary. The initial targets to watch can be seen via fibonacci relationships, moving averages and TD Trend Factor. The assault on the first area to monitor (around 1180) began with the final hour rally on Tuesday. Another (and perhaps more important) target to keep an eye on will be 1245. The short (red) moving average is sinking towards that level now.
At Monday's close the hourly chart had an unqualified break of the associated sequential buy risk level. This led to a rally attempt that stalled during yesterday's lunch hour. We then fell and actually broke the risk level (1127.87) in a qualified manner at 3pm. However, the break ended up being unconfirmed (higher low) as the bulls took charge during the closing hour. Result: the rally from extreme oversold conditions is on.
     Bottom Line: The allocation mix meter is at +25%. Expecting an oversold rally to be followed by a retest of the low.
     P.S. I will not be able to post Thursday morning.

GLD Monthly Chart

2011-08-09T02:24:00.000-07:00

     On the quarterly chart (discussed a few days ago) there were no D-waves completed from the 1999 low. On the monthly chart of GLD we are following a five wave sequence from that low with a fourth wave having completed at the 2008 bottom. That was also the completion of a Beta-pulse. These facts imply that we are currently in a fifth wave which is also a Delta-pulse. This means that the monthly chart is currently in a bullish position.
     As far as TD signals go, a 9-13-9 sell pattern completed in December 2010. However, that signal was negated in April 2011 when we had a qualified and confirmed break of the associated risk level. At this time we are waiting for either a sequential or combo sell signal to develop. The earliest this could happen would be October. Such a signal would most likely be the pullback we are waiting for on the Quarterly chart and would not be a sell signal in my allocation work. That is, the monthly chart would still contribute a +25% to the overall allocation mix.
     Bottom Line: Both the quarterly and monthly charts of GLD are bullish. These two charts add up to a +50% allocation meter reading; but we still have the weekly and daily charts to cover in the days ahead.

SPX Daily Chart - 8 August 2011

2011-08-09T01:39:00.000-07:00

     It was another remarkable day in the cash SP500 market; if only because all 500 stocks in that index were down on the day. All of them. And now we watch for the usual scenario to develop: bounce and retest.
     Yesterday marked bar #9 of a daily buy setup. This is the indication that tells us we should watch for a bounce. The indicators I follow then say to watch for a retest. As an example, the RSI (top pane) is now at it's lowest level since September 2001. The composite index is showing its lowest value in at least 28 years! Extreme indicator readings most often indicate that when the market finally finds its footing and bounces, it will then come back and retest the low.
     On the expected bounce (which should come within five bars of bar #9) we can use fibonacci relationships and moving averages to help set targets as well as TD Trend Factor. This gives me two areas to watch which are marked on the chart: around 1180 and then (and perhaps more importantly) 1245. At Monday's close the hourly chart had an unqualified break of sequential buy risk level, so we may try to start a bounce from here
     Bottom Line: The allocation mix meter is at +25%. Waiting for the bounce.

SPX Weekly Chart - 5 Aug 2011

2011-08-08T03:31:00.000-07:00

     It was, simply put, a horrible week for the cash SP500. After qualifying a break of the trendline that defines the entire rally from the 2009 lows (shown on today's chart of the weekly cash SP500 in orange), a feeble rally attempt failed at the short (red) and medium (blue) moving averages. The market then plunged in the Z-pulse of the price pulse model. Recall that the Z-pulse often contains the sharpest declines as the Delta-pulse often contains the largest rallies. The break of the bullish trendline was not only confirmed but the break of TDST support (horizontal dashed green line at 1219.50) was qualified as well. Price continued to fall and finally tried to find support at the end of the week at the long (green) moving averages.
     Using the RSI (top pane) as a trend indicator shows the seriousness of the current decline. The rally from the 2009 lows was shown to be of the bullish variety in April 2010 when the indicator broke above the zone reserved for bear market resistance. Note that we then held the zone reserved for bull market support when we pulled back into the Summer of 2010. This decline also held well above the Long moving average. The bull was reconfirmed on November 5, 2010 when the RSI again moved above the 63-67 zone. Bearish divergence after a sequential sell countdown 13 forewarned of trouble, and now we have broken below the support zone for bull markets and the Long moving average.
     Bottom Line: At this point there is no reason to rush into any new judgments abut the medium term outlook. The bears have reconfirmed their control of the market and the allocation meter is down to +25%.

GLD Quarterly Chart

2011-08-07T04:54:00.000-07:00

     The "big picture" view of GLD (World Gold Index); as seen by the Quarterly chart, is dominated from the tremendous bull rally from the 1999 low. Unusual is the fact that we have reached an astounding 40 consecutive price bars which closed higher than the close of the bar four previous to it. This included the string of 28 consecutive such closes through the completion of a sequential countdown in the second quarter of 2008 (2Q08). The implication of this development is that there has been no chance of a sell setup "recycle". The buying pressure has been unrelenting. Now, with the risk level associated with the completed sequential sell countdown (dashed horizontal cyan line at 1224.6) exceeded without even a price flip, this chart is a long way from any TD sell signal. At a minimum we would have to get a price flip to recycle and then another sell setup.
     This same conclusion is drawn from the price pulse model. From the 1999 low we are in a delta pulse of the sequence, and a sell signal can only be generated now with a direct collapse beneath the beta-pulse low. To get a more "reasonable" sell we need an x-pulse pullback followed by a y-pulse rally that sets up actionable sell parameters. Interestingly this is similar to needing a sell setup recycle.
     So is there a pullback in sight that might produce an x-pulse and sell setup recycle? The only hint that this might well be pending is the fact that the tops in the derivative oscillator (bottom pane) are diverging with price. So yes, our x-pulse pullback is coming. But when? To better answer this question we need to drop down to the monthly level which will be covered in my next post on GLD.
     Bottom Line: the quarterly chart is unsurprisingly bullish and would contribute a +25 to an allocation mix meter.

SPX Daily Chart - 4 August 2011

2011-08-05T02:19:00.000-07:00

     It was a horrible day no matter how you slice and dice it. Without bullish divergence between price and the RSI, Wednesday afternoon's bounce associated with the buy setup on the hourly chart led nowhere. This morning we find ourselves waiting for another sequential or countdown completion on that time frame; both counts being on bar #7.
     Thursday's price action sliced through the risk level (shown on the chart by the horizontal dashed cyan line at 1242.03) associated with the sequential buy signal on the daily chart. This time the break was qualified. Perhaps the bulls also need to wait for another buy setup to develop on this time frame. Waiting a bit is also counseled by the indicators I follow. As an example, the RSI (top pane) is now at it's lowest level since October 2008. Notice this is well prior to the ultimate 2009 low. The point is that extreme indicator readings most often indicate that when the market finally finds its footing it will come back and test the low after a rally or consolidation.
     Bottom Line: The allocation mix meter is at +25%. Waiting for the dust to clear.

SPX Daily Chart - 3 August 2011

2011-08-04T02:33:00.000-07:00

     The cash SP500 fell during the morning, breaking below the March low of 1249.05 which was critical to the monthly chart and the equity asset allocation meter. I have taken more money off the table and now only have a 25% position. By the end of the session the market had recovered all of its losses on the day and finished positive.
     On the hourly chart the TD sequential buy that completed at 1pm Tuesday never executed as we had a valid and confirmed break of the associated risk level of 1255.95. Interestingly, the market bottomed within a point of the calculated target from the confirmed break of the TD supply line (upsloping dashed green line) presented yesterday. At the noon hour the hourly then completed another TD Buy setup which led to the bounce into the close. Disconcerting is that the hourly RSI made low along with price - there was no bullish divergence. At first blush I interpret this as telling me a longer-term low is not in.
     Wednesday's price action dipped below the risk level (shown on the chart by the horizontal dashed cyan line at 1242.03) associated with the sequential buy signal on the daily chart. This was an unqualified break and is something the bulls can try to build on. Keep in mind that in my work the sequential only gives a "buy" signal if we get a price flip before a qualified and confirmed break of the risk level. That would occur on a close today above 1292.28. Furthermore, It would still take a price pulse buy signal (a move above the delta pulse high of 1347) before the allocation meter would be raised.
     Bottom Line: The allocation mix meter is now at +25%. Yes, this implies that as a longer term investor I think a significant equity top is in. I view any sequential buy signals on the hourly and/or daily charts as indicators of nothing more than a counter-trend rally. Perhaps playable by traders but not by my system.

SPX Daily Chart - 2 August 2011

2011-08-03T03:29:00.000-07:00

     First things first. Following yesterday's post we must now acknowledge that the bears have reconfirmed their control of the cash SP500 market. This brings us right to what was said two days ago in the latest monthly post: "... in my asset allocation work the actual "sell" signal will not come unless we get a print below the March low of 1249.05. Even though I believe that risk is growing for longer term investors (like myself), the monthly chart remains in a bullish position in my work. That is, it does not negatively impact asset allocation towards the equity market at this moment ... a break below the March low would change that situation." Such a move (now only 5 SPX points away) and the asset allocation meter immediately falls to 25%.
     Is there anything positive in the technicals as far as the bulls are concerned? Here we need to look closely at the hourly and daily charts. Let's start with the hourly. I have a TD sequential buy that completed at 1pm yesterday but have not yet had it confirmed with a price flip. To me this means the chart continues on the "verge" of a buy signal. However, this signal is already on the brink of being nullified as price has already had a valid break of the risk level at 1255.95. This will have to be watched closely this morning to see if a buy signal is actually generated or not.
     On the daily chart (attached) we had a validated and confirmed break of the TD supply line (upsloping dashed green line) on July 27. The calculated target associated with this event is 1235.36 with the next TD Trend Factor target at 1209.83. Both targets are shown on the chart. Will we reach them? The RSI (upper pane) continues to show that a bear market is underway on this time frame; but, we just completed a sequential buy countdown yesterday. The former fact supports reaching the targets while the latter says we may not. On top of this we can lay the daily price pulse pattern which shows we are in an X-pulse of a (still) bearish pattern. I think that this tilts the odds in favor of the bears.
     Keep in mind that in my work the sequential only gives a "buy" signal if we get a price flip before a qualified and confirmed break of the risk level (shown on the chart by the horizontal dashed cyan line at 1242.03). Furthermore, it would also take a price pulse buy signal (a move above the delta pulse high of 1347) before the allocation meter would be raised.
     Bottom Line: The allocation mix meter remains at +50% but would drop to 25% on any break of the March low. I believe that we now have confirmation that the July 7th high was the top of a counter-trend rally and that the rally high from the 2009 low was very likely made on May 2. I would view any sequential buy signals on the hourly and/or daily charts as indicators of nothing more than a counter-trend rally. Perhaps playable by traders but not by my system.

SPX Weekly Chart - 1 Aug 2011

2011-08-02T03:35:00.000-07:00

     After one trading day into the new week it is apparent that the equity market is not concerned with the debt ceiling, it is concerned with the trendline that defines the entire rally from the 2009 low. This line is shown on today's chart of the weekly cash SP500 in orange. We broke this line in a confirmed manner Monday morning by opening below it. The spike up from that open ran out of steam as we approached moving average (both short and medium) resistance.
     The price action has now confirmed that the Y-pulse completed at the July 8th high. Per the Price Pulse Model (from Tony Plummer's book "Forecasting Financial Markets: Technical Analysis and the Dynamics of Price" on page 109, revised edition 1990) we've been discussing over the past several weeks, a longer-term sell signal will be given if the z-pulse were to penetrate below the x-pulse low of 1258.07. The chart initially turned negative when the Beta-pulse low was broken during the week of June 10.
     As a follow-up to the last weekly post I have included the Derivative Oscillator (top pane). 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? If the action remains weak this week the answer will be yes.
     However, there is usually always something for the opposite side to hold on to. In this case the bulls will want to argue that a deep decline will be hard to immediately engineer from here for two reasons. One is that the Demand Line (dashed green line) can not be confirmed broken this week and secondly .... the daily chart has just completed bar #13 of a sequential buy countdown! More on this development tomorrow when I look at the latest daily chart.
     Bottom Line: At this point there is no reason to abandon the price pulse model. The bears will reconfirm their control if they can move this market below 1258.07. The allocation meter remains at +50%. That is, a half position in equities.

SPX Monthly Chart - July 2011

2011-08-01T02:35:00.000-07:00

     We closed near the lowest prices of the month basis the cash SP500 index. After breaking below the TD Demand Line (upsloping dashed green line) in a qualified manner in June, we has a calculated objective of 1276.35 which was met that same month. We then bounced quickly higher and moved above the June high in early July but then sank during the rest of the month. Of interest is that the July price action failed to confirm the Demand Line break. Although this leaves open the possibility that we rally, I think the odds are against a sustained move to new highs. Here's why:
     First ... Using the RSI (top pane) as a trend indicator we can see that we have turned down right in the area reserved for bear market resistance. That is, this indicator is currently saying that the rally from 2009 is most likely corrective in nature and that we may have run out of steam.
     Second ... Another negative development on the monthly chart is the decline in the Derivative Oscillator (middle pane) over the past two months which has led to a bearish divergence with both price and the RSI. This bearish divergence is also being shown by the Composite Index (not shown).
     Third ... June's downtrending price bar was also a price flip (closing lower than the close four bars prior) that cemented the TD Combo sell countdown in February. Note that this was also the first price flip after a sell setup bar #9. This setup bar #9 implies that we should have resolution of this bull/bear tension within five months. The Combo sell and bearish divergence in the derivative oscillator and composite index argue for a bearish resolution.
     These three developments, in my mind at least, outweigh the demand line failure and cast doubt on the equity market going forward. Even if we get a rally in August it will be hard to believe it is a bullish omen. In fact, even if we were to break the 1404.05 (TDST resistance) level in a qualified and confirmed manner it is hard to see a sequential sell signal not forming at the same time - we have been on bar #11 since May.
      With all that said, I have to keep in mind the Bottom Line: in my asset allocation work the actual "sell" signal will not come unless we get a print below the March low of 1249.05. Even though I believe that risk is growing for longer term investors (like myself), the monthly chart remains in a bullish position in my work. That is, it does not negatively impact asset allocation towards the equity market at this moment. As just mentioned, a break below the March low would change that situation.

SPX Daily Chart - 28 July 2011

2011-07-29T02:42:00.000-07:00

     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

2011-07-28T03:53:00.000-07:00

     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

2011-07-27T04:33:00.000-07:00

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

2011-07-26T04:09:00.000-07:00

     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

2011-07-25T02:30:00.000-07:00

     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%.

SPX Daily Chart - 21 July 2011

2011-07-22T04:29:00.000-07:00

     After consolidating at resistance on Wednesday, Thursday saw the cash SP500 move sharply higher to the next resistance area created by both daily (1345.20) and hourly (1343.78) TDST levels. Will this resistance hold or not?
     On both a daily and hourly basis we can say that the charts broke above their respective lines in a qualified manner. Let's look at both starting with the hourly. The break above the TDST line was not confirmed on an hourly basis and another sell setup completed at 3pm. This setup has not experienced a price flip and must hit 1355.35 (before such a flip occurs) if it is to become the active setup as far as sequential goes. In any event, this indicates that the market is vulnerable to a reversal or correction during the first half of trading today; particularly since we have a negative price/RSI divergence in place on the hourly chart.
     On the daily chart the break of the TDST line (horizontal, dashed red line on the chart) will not be confirmed today if we open below the line or fail to exceed yesterday's high. I would interpret such a failure as a warning that the delta pulse is running out of steam; and I favor this scenario.
     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 Daily Chart - 20 July 2011

2011-07-21T04:15:00.000-07:00

     Wednesday's price action in the cash SP500 is best described as 'drawing a line' at the resistance area created by the short (red) moving average on the daily chart and the hourly TDST resistance level of 1326.88. The poke above the daily short moving average was confirmed by the price action yesterday but the poke above hourly TDST resistance was not. A true stand off between the bulls and bears!
     If any thing is clear at this moment it is these four levels of support and resistance: 1343.78 to 1345.2; 1326.88; 1317.15 to 1318.65; and 1300 to 1306. Even if we start lower today I don't necessarily think that the recent run up from Monday's low is over. If that is the case I would expect the 1317-18 level to hold. The larger scenario is provided by the price pulse picture. The daily chart is now most likely in a delta pulse of a (still) bearish pattern. If beta bottomed at Monday's low the pattern can not be said to be bullish unless we then go on to exceed the alpha high (which I doubt).
    Perhaps the best way to end this posting is to repeat words from the weekly post: "At this point I think we will see; when all is said and done, generally sideways movement over the next couple of weeks."
     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 Daily Chart - 19 July 2011

2011-07-20T04:33:00.000-07:00

     After holding support at the medium (blue) moving average on Monday, the cash SP500 moved directly to the short (red) moving average yesterday; closing above it in a qualified manner. Will today see confirmation of that break? We are at interesting point since the challenge of the daily short moving average is occurring where we have TDST resistance (on the hourly chart) at 1326.88 - which is just above where we closed (1326.73).
     The verdict on whether this hourly resistance and daily moving average will hold the bulls here will be given very early in today's session. However; for the more important hourly sequential buy countdown (which is still stuck on bar #11) the 1343.78 level is of extreme importance and so I don't necessarily think that the decline from the July 7 high is done if resistance doesn't hold this morning. In fact, from a price pulse point of view, the daily chart is now most likely in a delta pulse of a (still) bearish pattern. This would support the resistance failing this morning. But note that if beta bottomed at Monday's low the pattern is still not bullish unless we then go on to exceed the alpha high (which is what I am doubting the bulls will be able to do).
     That 1343.78 level just mentioned is associated with the still active TDST resistance level on the daily chart at 1345.20. If this resistance area is not breached (in a qualified and confirmed manner) then i expect that the current rally from Monday's low will run out of steam and be followed by another drive down towards the Trend Factor target of 1281.06 (shown on the chart).
     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 Daily Chart - 18 July 2011

2011-07-19T04:31:00.000-07:00

     Starting from the long (green) moving average at the open, the cash SP500 moved steadily downward to break below the medium (blue) moving average by early afternoon. From there a rally lasted into the close and we finished above the blue moving average. The close yesterday was virtually identical with the weekly medium moving average. Yesterday I noted how this level would be important this week, but we still have four more days to go!
     On the hourly chart, I continue to watch a sequential buy countdown unfold. We hit bar #11 before the afternoon rally. Current TDST resistance on this time frame is at 1326.88 which is close to the daily short (red) moving average. The daily price pulse chart shows 1317.7 as an important point and so this area must be considered important resistance. However; for the hourly countdown, the 1343.78 level is of extreme importance and so don't think the decline is done if 1326.88 is broken. Because, if the 1343.78 level is not breached, I expect that any rally from here will run out of steam and be followed by another drive down towards the Trend Factor target of 1281.06 (shown on the chart).
     From a price pulse point of view, the daily chart is now in a beta pulse of a bearish pattern. The pattern can not turn bullish unless beta completes above the z bottom (which it is now threatening to do) and we then go on to exceed the alpha high (which I doubt).
     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 - 15 July 2011

2011-07-18T04:41:00.000-07:00

On the weekly time frame my expectation of topping action continues unaltered. This week my main focus will be on how the cash SP500 interacts with the short (red) and medium (blue) moving averages. Will they provide support to the market? Or is it possible that the 'y' pulse rally is complete?
Bottom Line: At this point I think we will see; when all is said and done, generally sideways movement over the next couple of weeks. At that point it may be time for the next directional move. The allocation meter is at +50%.

SPX Daily Chart - 14 July 2011

2011-07-15T03:56:00.000-07:00

     After hesitating at the short (red) and and long (green) moving averages Tuesday and Wednesday, the cash SP500 broke below them in a qualified manner yesterday. On the hourly chart, the price action on Tuesday and Wednesday can be seen as a consolidation and then short-lived upward bounce in response to a buy setup. Yesterday's decline broke below the support (risk) level associated with this setup in a qualified manner and was validated - an indication that the downtrend has resumed. As such, the medium (blue; about 1302) moving average is the next support level to watch on the daily chart. The weekly medium moving average is also at this level. I have also added the Trend Factor target of 1281.06 to the attached chart.
     From a price pulse point of view, the daily chart is now in a beta pulse of a bearish pattern. The pattern can not turn bullish unless beta completes above the z bottom and we then go on to exceed the alpha high.
     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 Daily Chart - 12 July 2011

2011-07-13T02:52:00.000-07:00

     The cash SP500 reached the short (red) moving average yesterday morning while recording a buy setup on the hourly chart. This provided support until the last hour of the day and we closed below both the short and long (green) moving averages. If these moving averages can't hold in the first hour of trading today then the medium (blue; about 1303) moving average is the next support level to watch. The medium moving average is also at this level on the weekly chart.
     From a price pulse point of view, the daily chart has just completed an alpha pulse in a bearish pattern. This means the pattern can not turn bullish unless we complete the current beta pulse above the z bottom and then go on to exceed the alpha high.
     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 any sign of a potential top as we move forward. In particular, two events would be very bearish: An outright break below 1249.05 or a failed retest of the July 7 high.

SPX Daily Chart - 11 July 2011

2011-07-12T03:38:00.000-07:00

     After reaching and validating an upside break of the Trend Factor (TF) target at 1338.12, the cash SP500 then broke above TDST resistance at 1345.20 (red horizontal dashed line). The break was not qualified (I am using the rules outlined in Jason Perl's book) and has been followed by a 40 point decline over two days. Also note that the high on July 7 was accompanied by an RSI peak in the area reserved for bear market resistance. The possibility that the move off the mid-June low is complete and was a counter-trend rally must be respected.
     The low yesterday was at the long (green) moving average. 1314-1316 is the current support level. If that can't hold then 1303 needs to be watched.
     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 any sign of a potential top as we move forward. In particular, two events would be very bearish: An outright break below 1249.05 or a failed retest of the July 7 high.

SPX Weekly Chart - 8 July 2011

2011-07-11T03:59:00.000-07:00

     Not much change on this time frame from my last posting; although believe it or not, we just had the second highest weekly closing price since the March 2009 low, and we've now achieved my 1344 target level.
     The current 'y' pulse rally can move us to new highs but I don't expect that. Instead I am expecting to see topping action before we reach the delta pulse high. Key will be the old sequential 13 risk level (shown by the horizontal cyan dashed line) at 1363.53 and the current supply line (the downsloping red dashed line). Let's see if the bulls can break them in a qualified manner and let's also see what the technical indicators look like if and when we get there. I particularly want to see if the RSI can get above the 63-67 zone.
    Bottom Line: The allocation meter is at +50%.

No Posting

2011-07-06T02:15:00.000-07:00

Due to personal business there will be no postings from me over the next couple of days. I hope to get back on schedule by the end of the week.

Cheers,
Saxby

SPX Daily Chart - 1 July 2011

2011-07-05T02:24:00.000-07:00

     Since my last daily update the cash SP500 has continued to move sharply higher. After reaching its sequential sell countdown, the hourly chart merely hesitated for five hours before resuming its march higher and validating a break above its risk level. We cleanly broke through resistance in the 1313-16 area and have closed above the Trend Factor (TF) target of 1338.12. While we wait to see if this break of the TF is validated (it is already qualified) there are two other items to watch to gauge if the bulls can continue their charge.
     The first is overcoming TDST resistance at 1345.20 (red horizontal dashed line). Second is the action of the RSI. Note that if this is only a corrective thrust on the daily chart then we should not break above the bear market resistance zone of 63-67.
      Bottom Line: The allocation mix meter is at +50%. The market was very strong last week and is close to my target of 1344. However, 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 any sign of a potential top as we move into July.

SPX Weekly Chart - 1 Jul 2011

2011-07-04T01:51:00.000-07:00

     I certainly haven't foreseen how every squiggle in price action will develop and nor do I ever expect to. As a longer term investor I hope to catch the major turning points and long term trends. For nearly a month now I have been looking for the March lows to hold followed by a choppy rally back above 1344. Although the last few days have been anything but choppy, the cash SP500 has rocketed straight up, hitting 1341.01 on Friday and is now very close to the long mentioned 1344 level.
     The rally from the June 16 low on the daily chart is the "bounce" mentioned in yesterday's monthly chart discussion. It is developing according to the Price Pulse theory scenario outlined in my weekly chart posting for June 10. I repeat it 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.
     I am expecting the y pulse (wave) to begin before the March low is broken and for it to rally above the peak of the alpha pulse but perhaps not the delta pulse."

     The 'x' pulse ended after reaching the Trend Factor target (1265.68) and the long term trendline (see chart). We broke below the Trend Factor target in a qualified manner the week before last but failed to close below it. This was a warning that the bulls might be able to hold and launch the "y" pulse rally. The break of the Trend Factor target was subsequently invalidated (proven false) last week when the bears failed to open the week below the 1265.68 mark. Additionally, the weekly RSI has turned up without dropping below the bull market support zone (38-42). Result? The 'y' pulse rally which has brought us very near the 1344 target. Now what?
     At this point there is no reason to abandon the price pulse model. Theoretically, the current 'y' pulse rally can move us to new highs but I don't expect that. Instead I will be watching for topping action before we reach the delta pulse high. Key will be resistance provided by the old sequential 13 risk level (shown by the horizontal cyan dashed line) at 1363.53 and the current supply line (the downsloping red dashed line). Let's see if the bulls can break them in a qualified manner and let's also see what the technical indicators look like if and when we get there.
    Bottom Line: The allocation meter is at +50%. Monday is a holiday and so the next daily report will be Tuesday morning before the market opens.

SPX Monthly Chart - June 2011

2011-07-01T05:24:00.000-07:00

     On a monthly basis the cash SP500 gave ground in June, breaking below the TD Demand Line (upsloping dashed green line) in a qualified manner. June's downtrending price bar was also a price flip (closing lower than the close four bars prior) that cemented the TD Combo sell countdown in February. Note that this was also the first price flip after a sell setup bar #9 in May. These developments continue the deterioration on this time frame. In my long-term (investing) asset allocation work the actual "sell" signal would come with a break below the March low of 1249.05.
     Using the RSI (top pane) as a trend indicator, a bear market was signaled on this time frame in September 2008. Of great interest is the fact that we have now turned down right in the area reserved for bear market resistance shown by the double red lines. That is, this indicator is currently saying that the rally from 2009 is most likely corrective in nature and that we may have run out of steam.
     Another negative development on the monthly chart is the decline in the Derivative Oscillator (middle pane) over the past two months which has led to a bearish divergence with price. Previously, a 'failure at the zero line' (indicated by the arrow) by this indicator in September 2010 combined with the sharp fall from an extreme reading in December 2009 (while prices only moved sideways), was a warning for a sharp rally. That rally occurred and now the bearish divergence should be cause for concern.
     The qualified break of the Demand Line provides a calculated objective of 1276.35 which was met in June. The TD Trend Factor target was 1270.41 (shown by the purple line) and was also met. On the monthly time frame the next support area is provided by the moving averages in the 1214-1225 area. Finally, let's keep in mind that the lower time frames are showing that the bounce up after meeting the monthly Demand Line and Trend Factor targets is still ongoing. I will cover the latest weekly chart by Monday morning.
     Bottom Line: Although I think that risk to longer term investors (like myself) is growing, the monthly chart remains a bullish contributor in my work. That is, it does not negatively impact asset allocation towards the equity market at this moment. A break below the March low (as mentioned above) would change that situation.

SPX Daily Chart - 29 June 2011

2011-06-30T02:07:00.001-07:00

     The cash SP500 broke out to the upside yesterday and sliced through the medium (blue) moving average. The next upside target is resistance in the 1313-16 area caused by: previous TDST Support, the daily long moving average and the weekly short moving average.
     The hourly chart has reached ten in its sequential sell countdown and will be the focus during the day today.
    Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a choppy rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.

Investigations - Part 3

2011-06-29T02:54:00.000-07:00

Note: It may help to refer to the previous postings in this series.

     If one were following along with the Quarterly chart they would have seen a sell setup bar #18 in 1999.2 (2nd Quarter 1999). Any multiple of nine should be of interest to the analyst as weakness (in the case of a sell setup) may appear within the next five price bars (by 3Q2000). Is this a sign of the exhaustion that actually materialized just three bars later at the March 2000 high? It would seem so.
     Also keep in mind that on the next higher time frame (the yearly) we saw a sequential sell countdown bar #13 in 1998. This was the first indication that the risk of a top was very high. Note that the yearly warning came before the quarterly.
     Another question is whether the trend exhaustion at the 2000 high would result in just a correction (pullback or consolidation) or a trend change. Can D-Wave analysis help to answer that question? If one assumes that the yearly D.3 wave (an impulse wave) should be composed of FIVE quarterly waves then the answer would be 'just a correction' since the quarterly chart was itself in a D.3 wave and not D.5. The implication is that the trend change would not occur until after the full five wave sequence at the quarterly level. However ... this assumption rests on the hypothesis that the waves nest in this fashion (five waves compose an impulse wave), and we haven't conclusively shown that yet.
    So let's examine quarterly D-Wave 3 a bit further. It began at the 1982.3 (3Q1982) low and ended at the 2000.1 (1Q2000) high. The question: Does the monthly chart show a five wave D-wave sequence within that block of time? The answer: Yes. You can start a monthly sequence because the 1982 low (102.2 in August) is a 21 period low. The analysis then reveals D1 at the 1983.10 high; D2 at the 1984.7 low; D3 at the 1987.8 high; D4 at the 1987.10 low; and D5 at the 2000.3 high. The monthly cash SP500 chart (from 1983) is attached to help visualize this sequence. It also shows where the quarterly sell setup bar 18 and the yearly sequential bar 13 occurred.
     Again it appears as if the higher level, impulsive, D-wave (Quarterly D3) is constructed by a five wave sequence at the next lower time frame (Monthly). Still, we have only seen a couple of examples, and that is not a big enough sample size. However, the point I want to make is that with such an assumption one would have only expected a 'correction' on the Quarterly chart since a fourth wave was expected to be followed by another (wave 5) impulse. I will explain this further next time and then look at how the first Quarterly wave (D1) in the sequence from the 1974 low played out on the monthly scale.
     To Be Continued ....

SPX Daily Chart - 28 June 2011

2011-06-29T02:19:00.000-07:00

     So far I would call the price action since the completed buy setup (on June 13) a consolidation, but we are now on the verge of breaking out to the upside. The hourly chart recorded a completed sell setup yesterday but didn't even pullback in response. This indicates that a full sequential countdown on that time frame is to be expected - which points to the rally continuing for at least another day or two.
     The only fly in the ointment is that the break above the Supply line (downsloping red dashed line) yesterday was not qualified. Oftentimes this means that further consolidation is needed before a move can begin in earnest. In any event, the next upside target is the medium (blue) moving average in the 1303/4 area. Above that we find resistance in the 1313-16 area.
    Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a choppy rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.

SPX Daily Chart - 27 June 2011

2011-06-28T03:39:00.000-07:00

Perhaps the most constructive aspect of the basing action over the past dozen sessions has been the ability of the RSI to hold bull market support on Friday's decline. This comes after bullish divergence between price and the RSI with a completed buy setup bar #9. Even though we closed below the short (red) moving average on Friday, that break was not confirmed on Monday. Have the bulls steadied the ship? Perhaps; but it may take a little more work before a good rally can kick off. Why? The Supply line (downsloping red dashed line) can not be qualified from here. We may need a little bit more basing action. If price can resume moving higher then the next target would be the medium (blue) moving average in the 1303 area.
Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.

SPX Weekly Chart - 24 Jun 2011

2011-06-27T03:03:00.000-07:00

In last week's update it looked like the battle would be over the Trend Factor target (1265.68) and the long term trendline, and that seems to be the case. We broke below each target last week in a qualified manner but failed to end the week below either. This is an indication that the bulls may be able to hold, but only an indication. To invalidate last week's break the bulls are going to have to hold here again this week. At the very least the bulls will want to keep price above last week's low. They will also want the weekly RSI to turn up without dropping below the bull market support zone (38-42). So far it has held, falling to 44.7 last week. However, even if the bulls are successful, the longer term picture is still dicey. Without (at least) a sequential buy setup appearing (which would take at least three more weeks) it looks like any bullish counter attack will be just that - a counter trend rally within a larger bearish decline.
Bottom Line: The allocation meter is at +50%. If the long term trendline and the Trend factor target are not enough to support the market then the March low is the next target. Any break below the March low of 1249.05 will cause me to lighten my position further as the allocation meter would fall to +25%.

Investigations - Part 2

2011-06-26T03:03:00.000-07:00

     Do D-Waves nest? This will be a particular focus of my studies going forward. Take the yearly DJIA chart briefly discussed in part 1 of this series. D2 ended at the 1974 low. On the Quarterly chart we can start a D-wave sequence there since it is a 21 quarter low. We then get (Quarterly chart): D1: 1976.3 high (1976.3 means quarter 3 in 1976); D2: 1980.1 low; D3: 2000.1 high; D4: 2002.4 low; D5: 2007.4 high; DA: 2009.1 low. The quarterly cash SP500 chart (from 1983) is attached to help visualize this sequence.
     The point I want to make is that a Quarterly five wave sequence is currently shown complete at the 2007 high. Recall that the yearly chart is awaiting D3 completion. Can we make the assumption that it completed at the 2007 high since a complete quarterly chart sequence 'nested' in the yearly wave 3 position? Such an assumption would; at the very least, suggest that one pay particular attention to signs of exhaustion at the 2007 high using other techniques. I will do that in the next posting of this series. Another question raised: Does a higher level 'impulse' wave (D1, D3, and D5) always contain five waves at the next lower level?
     To Be Continued ....

SPX Daily Chart - 23 June 2011

2011-06-24T01:51:00.000-07:00

An extremely volatile day! Supposedly Tom DeMark said that only two prices matter, the open and the close; everything else is just emotion. Well, after the dust cleared it can be said that both the open and close were above the short (red) moving average. We also held the recent lows. A successful retest? The bulls most likely think so, but now need to prove it. If yesterday morning's steep fall was just a pullback before prices resume moving higher then the next strong area of resistance on the daily chart is 1310-1316.
Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.

SPX Daily Chart - 22 June 2011

2011-06-23T02:00:00.000-07:00

     After a brief dip at the open the cash SP500 market recovered to make a new rally high before moving sideways for 3.5 hours. The bears moved in late in the session and we sold off into the close, invalidating Tuesday's break of the supply line target and proving it to be (at least short term) resistance. Yesterday's high also marked the end of D.5 on the 15 minute chart and the end of the upward moving hourly D-Wave from the June 16 low. The question now: Did the late day sell off begin a move to new lows or is it just a pullback before moving higher?
     The hourly chart completed a sell setup at the high while breaking up through hourly TDST resistance at 1296.22. However, this was not a qualified break and we pulled back below that level before making another (and this time qualified) break upwards at 1 pm. However, the combination of completed D-waves, a sell setup and bearish divergence with the RSI were enough for the bears to gain control into the close.
     The fact that the sell setup sequence had a bar with a close above TDST resistance along with the validated break of TDST resistance itself lead me to believe that we will end up with just a pullback before price moves higher again. I will be watching the short (red) moving average to be a support area. If prices then resume moving higher the next strong area of resistance on the daily chart is 1310-1316.
    Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.

SPX Daily Chart - 21 June 2011

2011-06-22T05:07:00.000-07:00

     The bulls were able to provide follow through to the upside in the cash SP500 yesterday. We rallied directly to the calculated target of the recently broken supply line and then stalled for the remainder of the day. However, the break of the target at 1295.31 was qualified.
     Although profit taking by traders is not unexpected after such a bullish day, there are signs that there may be more upside to come before this rally is ultimately over. Indications are that the D-Wave on the daily chart from the May 2 high is complete. Right now I am calling it D.A, which would imply that the move up from the June 16 low is D.B. It is coming off of a completed buy setup and bullish technical divergence.
     The next challenge to the bulls is hourly TDST resistance at 1296.22. Although we poked above it yesterday the break was invalidated at the close. Additionally, we will have to see if today's price action invalidates the breaking of our supply line target of 1295.31 on the daily chart. Since the hourly RSI is now indicating a bull trend I would have to view any pullback from here as just that, a pullback. If the rally continues over the coming days then the next strong area of resistance on the daily chart is 1312-1318.
    Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.
     P.S. There may not be a daily posting tomorrow.

SPX Daily Chart - 20 June 2011

2011-06-21T04:18:00.000-07:00

     The cash SP500 has continued to struggle higher over the past two sessions. The low last Thursday was above the risk level (horizontal dashed cyan line at 1254.24) of the recently completed daily buy setup where we had bullish divergence between price and the technical indicators I track.
     The bounce from the low has been less than impressive. After a qualified break of the Supply line (dashed red line) on Friday the market backed off and closed below it; which is weak price action. Not to be deterred the bulls opened the market back above the line yesterday (a qualified break) and this time were able to close above it - a better sign of strength. The calculated target of this supply line break is 1295.31 and is indicated on the chart. To reach that target the bulls must first clear the short (red) moving average which will be at about yesterday's high today. Let's see if we get any follow through to the upside today.
    Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low will be made above the March low and that a rally will then take us back above the 1344 level. However; I remain quite concerned that the high may already be in for the rally from the 2009 low. Any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.

Investigations - Part 1

2011-06-20T03:27:00.000-07:00

     Lately I have been investigating the D-wave; trying to wrap my brain around the unique framework it provides. Let's consider the wave structure from the hourly bar chart of the cash SP500 which is displayed in the attached chart. The hourly D-waves are plotted on the daily bar chart.
     Perhaps the key to using this data is to focus on the fact that the end of three (A-B-C) or five (1-2-3-4-5) wave swings are potential exhaustion areas. Next we make the assumption that the next higher time frame chart is a 'forcing' mechanism. That is, you only want to take positions that are in sync with the next higher time frame. Since Combo, Setup and Sequential are also designed to identify exhaustion areas it makes sense to see how they all interact.
     To start, take this groundwork: The yearly DJIA D-wave count can begin at the 1932 low since it is a 21 period low. From that starting point D1 ended at the 1966 high and D2 at the 1974 low. As of today we still don't have confirmation that D3 has ended. Note that these waves could be labeled DA, DB, and DC. What is the deciding factor? The trend. The price action since 1932 (on a yearly basis) is certainly not a counter-trend (corrective) move.
     To Be Continued ....

SPX Weekly Chart - 17 Jun 2011

2011-06-20T02:47:00.000-07:00

     With last week's downtrending price bar the weekly D-wave count now shows the possibility that the entire rally from the March 2009 low is complete. We recorded a sequential sell countdown bar #13 on February 18. After such a signal it is advisable to allow up to twelve weeks for a change in trend to develop. On weeks 10 & 11 there was a false breakout to the upside and then the current decline started on week 12. The failure to continue the uptrend past week 11 was accompanied by a bearish RSI divergence.
      Note that last week's low touched the uprtrend line drawn across the March '09 and July '10 lows. It also fulfilled the TD Trend Factor target (1265.68) and confirmed the break below the medium (blue) moving average. All in all the picture is quite negative on this timeframe.
     The immediate battle will be over the already mentioned Trend Factor target and long term trendline, which are essentially at the same price this week. The bears want to close the market below this level on a weekly basis. They also want the weekly RSI to drop below the bull market support zone (38-42). In order to launch a counter attack the bulls want to close above those same levels. However, without at least a sequential buy setup appearing (which would take at least four more weeks) it looks like any bullish counter attack will be just that - a counter trend rally within a larger bearish decline.
    Bottom Line: The allocation meter is at +50%. If meeting the long term trendline and the Trend factor target are not enough then the March low is the next target. Any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.
     P.S. I will be starting a new series today in addition to my regular postings. It will be focused on D-Wave studies but also cover combo, sequential and setup.

SPX Daily Chart - 16 June 2011

2011-06-17T04:01:00.000-07:00

After all was said and done on Thursday there was little change in my view of the market. Yesterday's low was still above the risk level of the recently completed daily buy setup (horizontal dashed cyan line at 1254.24) and we still have developing bullish divergence between price and the technical indicators I track. Today I show the Derivative Oscillator, which has been rising since the end of what Chuck is labeling wave 3. Does this mean the market must rally? Of course not, as the last few days have amply illustrated. However; I still think a rally is coming before we break below the March low - and time is running out.
Perhaps the biggest change in the chart is that the Supply line (dashed red line) has readjusted. (Aside: Note how these lines oftentimes parallel one of the moving averages). Any break above that line today (1276.69) will be qualified and may be the first indication that an intermediate term low is in.
Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low will be made above the March low and that a rally will then take us back above the 1344 level. However; I remain quite concerned that the high may already be in for the rally from the 2009 low.

SPX Daily Chart - 15 June 2011

2011-06-16T03:25:00.000-07:00

     The bounce experienced on Tuesday was completely erased yesterday. As 'Wallfly' pointed out in a comment the other day, trying to pick a low here is fraught with risk since the higher level charts are so negative. Keep in mind that I am not a trader but rather a long term investor. I track the short term movements but only to keep my finger on the pulse. Lately I have lightened up my position to 50% (allocation meter) and will take more money off the table if we break below the March low.
     That being said, with the risk level of the recently completed daily buy setup below the market (horizontal dashed cyan line at 1254.24) combined with a still developing bullish divergence between price and the RSI/Composite index, I still think a rally is coming before we break below the March low. That being said, I wouldn't take such a long trade even if I was a swing trader. Why? Because the buy setup completed below TDST support (horizontal dashed green line at 1279.2).The trend is down; risk is high.
    Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low will be made above the March low and that a choppy rally will then take us back above the 1344 level. However; I remain quite concerned that the high may already be in for the rally from the 2009 low.

SPX Daily Chart - 14 June 2011

2011-06-15T02:22:00.000-07:00

     Yesterday's rally was in response to an oversold condition: a daily buy countdown bar #9 and bullish divergence between price and the RSI. The question now is whether this move has any staying power. At this point I am willing to give the bulls the benefit of the doubt - if only for a few days. Oftentimes there is a 1-4 day window of bullishness after a completed buy countdown and price flip.
     In today's session I will be watching to see if we get any follow through. If so, the first upside target is the short (red) moving average which will be at about 1297/8 today. If not, I want to see if the bulls can contain the damage by keeping the hourly RSI above the 38 mark.
     Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a choppy rally has begun that will eventually take us back above the 1344 level. However; I remain quite concerned that the high may already be in for the rally from the 2009 low.

SPX Daily Chart - 13 June 2011

2011-06-14T03:42:00.000-07:00

     On Monday the cash SP500 broke TD Support of 1279.20 in the process of meeting the weekly TD Trend Factor target of 1265.68 - the low of the day was 1265.64. This price action also completed a daily buy countdown bar #9 and bullish divergence between price and the daily RSI. It looks like any rally from here might just be counter trend.
     The hourly chart has shown a good attempt to form a base from which to rally over the past two sessions. There was bullish price/RSI divergence yesterday and the market is fighting to finally hold the area reserved for bull market lows; which is an important first step in starting a rally.
     In today's session I will be watching to see if any rally attempt at the open can clear the 1279.52 level. If so, Chuck tells me that this will mean the Elliott Wave from the 1345.2 high is complete. He says it would be either wave '3 of C' or 'c of C' (depending on whether an expanded Flat or triangle is forming from the February high. I have added Chuck's count to today's chart. Most importantly would be a bullish price flip on the daily chart - a close today above 1279.56 would do the trick. If these two conditions are met we may have an actual multi-day rally attempt on our hands.
     Bottom Line: The allocation mix meter is at +50%. My near term scenario has the current decline ending imminently (if it hasn't already) and holding above the March lows. This will be followed by a choppy rally that takes us back above the 1344 level. However; I remain quite concerned that the high may already be in for the rally from the 2009 low.

SPX Weekly Chart - 10 Jun 2011

2011-06-13T03:09:00.000-07:00

     Please keep in mind that we will have a monthly price flip if we close June below 1327.22. Such a flip will trigger the already completed TD Combo and sell counts on the monthly chart. These signals would then occur with bearish divergence between price and the composite index, and between price and the derivative oscillator. In sum, the risk of a significant top in equities remains high.
      As stated last week, the weekly chart is also quite weak right now - if not outright bearish. Note that we have now met the calculated minimum objective (1282.73) associated with the qualified break of the TD Demand Line (upsloping green line on chart). Last week's price action also confirmed the break of the short (red) moving average and we've now closed below the medium (blue) moving average. We'll see if we can confirm that break this week. The TD Trend Factor target is just below the market at 1265.68.
     The weekly chart's price pulse scenario can be captured (p. 109) by these words from Tony Plummer's book "Forecasting Financial Markets: Technical Analysis and the Dynamics of Price": "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.
     I am expecting the upcoming y pulse (wave) to begin before the March low is broken and for it to lift prices above the peak of the alpha pulse but perhaps not the delta pulse.
    Bottom Line: The allocation meter is now at +50%. If meeting the TD Line objective and the Trend factor target are not enough then the March low is the next target. Any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.

Chuck's Waves - SP500 Cash Index

2011-06-10T06:08:00.000-07:00

SPX Daily Chart - 9 June 2011

2011-06-10T04:23:00.000-07:00

     At least for now the cash SP500 has held TDST Support at 1279.20.
     On the hourly chart yesterday: The market rose immediately after completing both a sequential and buy countdown on Wednesday. Both of these completed counts were accompanied by a bullish price/RSI divergence. We finally had a bullish price flip at the 11 o'clock hour and price responded by climbing steadily. We approached hourly TDST resistance (1296.22) before selling off in the last hour.
     In today's session I will be watching to see if the pullback that started in the last hour yesterday can hold the RSI zone reserved for support in bull markets. Such a development would set the stage for another swing higher. On any such swing I want to see if TDST resistance can be broken in a qualified manner. If so we may reach towards the short (red) moving average.
     Bottom Line: The allocation mix meter is at +50%. My near term scenario has the current decline ending shortly (within the next few sessions if it hasn't already) and holding above the March lows. This will be followed by a choppy rally that takes us back above the 1344 level. However; I remain quite concerned that the high may already be in for the rally from the 2009 low.

SPX Daily Chart - 8 June 2011

2011-06-09T03:51:00.000-07:00

     The cash SP500 declined again, this time to the TD Support Line associated with the currently active sequential sell countdown. This support zone (1275-79 area) and the 1263-66 area are the last ones before the critical March bottom.
     On the hourly chart yesterday: After starting the session by forming a TD Sequential Buy Countdown Bar #13, the market bounced creating positive divergence between price and the RSI. This weak upward move stalled by noon and we drifted sideways for an hour before making fresh lows before 2pm. A rally during the 3pm hour formed another bullish price/RSI divergence but we have yet to see a bullish price flip to confirm the sequential buy signal. The session ended with another touch of new lows although the bulls did manage to close above the TD Support line at 1279.20.
     In today's session I will be watching for a bullish price flip to confirm the TD Sequential buy countdown. Such an event with bullish price/RSI divergence in place should lead to at least a rally attempt. This price flip must happen before a qualified break of the bullish risk level of 1262.93.
     Bottom Line: The allocation mix meter is at +50%. My near term scenario has the current decline ending shortly (within the next three sessions) and holding above the March lows. This will be followed by a choppy rally that takes us back above the 1344 level. However; I remain quite concerned that the high may already be in for the rally from the 2009 low.

SPX Daily Chart - 7 June 2011

2011-06-08T02:43:00.000-07:00

     The session started with a bounce as the cash SP500 reacted to reaching the TD Trend Factor target of 1285.54 (and the overall support zone in the 1282-86 area) as well as completing a TD Buy Setup on the hourly chart. That bounce was done by late morning and then we drifted sideways until the last hour of the day when the bears reasserted themselves. We ended up with an inside bar, back in the support zone and with a close just below the Trend Factor target.
     In today's session I will be watching for a TD Sequential buy countdown to conclude early on as we ended yesterday on bar #12. If the market can find its footing the first upside target would be the short moving average which should be at about 1313 or so today. If we can't hold here then the 1275-1279 support area is next, with even lower support zones found at 1263-1266 and then 1249-1257.
     Bottom Line: The allocation mix meter is now at +50%. My near term scenario has the current decline ending shortly (within the next four sessions if 1284.72 wasn't the low) and holding above the March lows. This will be followed by a choppy rally that takes us back above the 1344 level. However; I am now quite concerned that the high may already be in for the rally from the 2009 low.

SPX Daily Chart - 6 June 2011

2011-06-07T03:39:00.000-07:00

     Lots to talk about today. Yesterday the allocation mix meter fell to +50% as the market continued to weaken. With the break of TDST support confirmed the door to the next downside support target of 1285.54 (TD Trend Factor) was opened. We hit that mark today but closed just above it. The low yesterday was at 1284.72. Recall from the May 27 weekly post that the weekly TD Demand line break had a calculated objective of 1282.73. The weekly medium moving average sits at 1287.17 this morning. Now that we are in the 1282-1286 target zone, what next? More on this below; but first a remark on the weekly chart's false upside breakout of late April/early May.
     The methodology I was using to validate the break of the risk (stop loss) level on the weekly chart at the late April/early May high (see weekly chart updates) is generally the criteria used for TDST line breaks. Instead, if one uses the criteria usually used for qualifying TD demand/supply line breaks, the risk level was never broken in a qualified (confirmed fashion); i.e. it was a false breakout. I will keep this in mind going forward.
     So now what? First we have to see whether the current support zone holds. If we can't hold here then the 1275-1279 support area is next, followed by 1263-1266 and then 1249-1257. Today I will be watching for the end of a sequential buy countdown on the hourly chart. We ended yesterday on bar #11.
     Bottom Line: The allocation mix meter is now at +50%. I consider myself more an investor than trader and having only half a position is indicative of my belief that risk is getting quite high here. This does not mean I think the cash SP500 is about to immediately implode. My near term scenario has the current decline ending shortly (within the next five sessions) and holding above the March lows. This will be followed by a choppy rally that takes us back above the 1344 level. However; I am now quite concerned that the high may already be in for the rally from the 2009 low.

SPX Weekly Chart - 3 June 2011

2011-06-06T02:50:00.000-07:00

     I want to start this posting with a quick review of the monthly chart in order to help clarify my thinking. After completing a TD Combo sell countdown to bar #13 in February we have yet to have a price flip for a sell signal. Such a flip would occur in June if we were to close the month below 1327.22. At the end of May we made a TD sell setup bar #9. This puts added emphasis on the possibility of an important top being made.
      The weekly chart made a TD Sequential (sell) #13 bar on February 18, 2011 (completing in conjunction with the monthly TD Combo). On this time frame we did have a price flip - on March 11. For this sell signal, the calculated risk (stop loss) level was 1363.53. We closed above this level on April 29 which led me to expect still higher highs. Since then the question is whether or not that break of the risk level disqualified the sell signal or if it were only a false breakout. It all depends on how you define a qualified break. My working hypothesis has been that it was a qualified break and so we will see new highs without breaking below the 1294.7 level (the April 18 low). If the 1294.7 level is broken I will have to re-look my working definition of what constitutes a qualified break (realizing that no methodology will ever be perfect).
     We closed below the short (red) moving average this week and now have to see whether that break is confirmed or not. Last week I gave a few reasons on why any break of this average would not be confirmed. Let's review them. (1) A primary reason for my belief is that the monthly chart is still positive. But again, perhaps my definition is wrong. Maybe the monthly shows both a completed TD Combo and a completed TD Sell Setup with neither one negated. Even if one "trades" with a price flip, perhaps the chart should be defined as bearish on signal completion - not trade entry. (2) I have been viewing the RSI (top pane) in a positive rather than negative fashion. Instead of relying on the displayed bearish divergence, I had been focusing on the possible positive reversal (shown by the two arrows on the RSI which match the November 26, 2010 and March 18, 2011 price closes). This reversal calculated to a 1432.81 price target. However, as can be seen from the chart, this positive reversal has been negated; leaving the bearish divergence!
     All of the above point to the fact that the monthly and weekly charts are quite weak right now; if not outright bearish. Also of note is the fact that the break (two weeks ago) of the TD Demand Line (upsloping green line) in a qualified manner gives a calculated objective of 1282.73 to the downside. Note that the medium (blue) moving average will be near this level this upcoming week. It looks like this objective will be met if we confirm the break of the short moving average.
    Bottom Line: Assuming the Sequential risk level of 1363.53 was confirmed broken, the weekly chart is in a bullish position and so my allocation mix meter is at +100%. Although currently still expecting new highs there are warning signs that all is not well with the equity markets. Any violation of the 1294.7 level this week will immediately make me take half my position off the table (allocation meter falls to +50%).

SPX Daily Chart - 2 June 2011

2011-06-03T03:46:00.000-07:00

     Yesterday the close below the long (green) moving average was confirmed but we did not close below TDST support. If TDST support (1312.62) can't hold the next downside support is at 1285.54 (TD Trend Factor). Recall from Tuesday's weekly post that we had a weekly TD Demand line break with a calculated objective of 1282.73. The weekly medium moving average sits at 1284.43 this morning.
     The cluster of targets in the 1282-1286 zone are concerning since I have been expecting the 1294.7 level to hold. And that is why today's action continues to be so important for the bullish case. There are reasons to believe it can hold: Daily RSI still holding bull market support zone; Price acceleration down since the May 31 high not being matched by the derivative oscillator; the composite index & derivative oscillator not at new lows like price or RSI; a TD Buy setup completed at the low on yesterday's hourly chart; and there was a bullish RSI/Price divergence at yesterday's low on the 15 minute chart. However; even with all of those 'possible' supporting technicals, we still need to see TDST support hold. Remember that a close below 1312.62 must be confirmed before we claim it has been broken.
     Bottom Line: The allocation mix meter remains at +100%. I am still expecting to see new highs before the April low is violated. If I am wrong the mix meter immediately goes to +50% on a break below 1294.7.

SPX Daily Chart - 1 June 2011

2011-06-02T03:31:00.000-07:00

     After holding TDST Support (1312.62) on the daily chart last week, the cash SP500 bounced through the short (red) and medium (blue) moving averages as well as the TD Supply line (downsloping dashed red line). However, none of these upside line breaks were qualified and we sold off sharply yesterday.
     Yesterday's sell off also saw a qualified break of the TD Demand Line (upsloping dashed green line). Today my technical focus will be on whether that break (as well as the close below the long; green, moving average) is confirmed and whether we close below TDST support or not. If these levels can't hold the next downside support is at 1285.54 (TD Trend Factor). Recall from Tuesday's weekly post that we had a weekly TD Demand line break with a calculated objective of 1282.73. The weekly medium moving average sits at 1284.48 this morning.
     The cluster of targets in the 1282-1286 zone are concerning since I have been expecting the 1294.7 level to hold. And that is why today's action is so important for the bullish case. Let's see if we can hold TDST support over the next two days. Remember that a close below that level must be confirmed before we claim it has been broken.
     Bottom Line: The allocation mix meter remains at +100%. I am still expecting to see new highs before the April low is violated. If I am wrong the mix meter immediately goes to +50% on a break below 1294.7.

SPX Monthly Chart - May 2011

2011-06-01T03:09:00.000-07:00

     On a monthly basis the cash SP500 formed another uptrending price bar in May. After completing a TD Combo countdown to bar #13 in February we have yet to have the price flip required for an actual sell signal. Such a flip would occur in June if we were to close the month below 1327.22. Also note that we are now at a sequential countdown bar #11 and have made a sell setup bar #9. All of this data show the market inching closer to a sell signal - but it hasn't happened yet.
     Continuing to be of extreme importance on the monthly chart are the 1403.03 and 1404.05 levels. If price exceeds the former number then any and all Combo or Sequential signals will be held in abeyance. If price exceeds the latter number in a qualified manner then we know that the rally from the March 2009 low is not just a counter-trend rally (as defined by TD concepts). Using the RSI (top pane) as a trend indicator we can see that a bear market was signaled on this time frame in September 2008. Of great interest is that we continue right in the area reserved for bear market resistance. That is, this indicator is saying that if the rally from 2009 is corrective in nature we have about run out of steam. A move above 67 in the RSI is equivalent in meaning to a qualified break of 1404.05. The new setup bar #9 implies that we should have resolution of this bull/bear tension by the Autumnal Equinox.
     Another worrisome (but not yet fatal) development on the monthly chart is the turn down in the Derivative Oscillator (middle pane). First note the developing bearish divergence with price beginning now. Then notice the 'failure at the zero line' (indicated by the arrow) that was formed by this indicator in September 2010. That failure, along with the sharp fall from an extreme reading in December 2009 while prices only moved sideways, was a warning at the time for a sharp rally. That rally has occurred and now the developing bearish divergence should be cause for concern.
     Finally, let's see what the TD Demand Line (dashed upsloping green line) has to offer. 1338.35 is the key number in June. A break below that level would be a qualified break of the Demand Line, indicating that we can expect June to close below that level with a calculated objective of 1276.35. Meeting such an objective would certainly raise the odds of a June price flip.
     Bottom Line: Although risk is growing, the monthly chart remains in a bullish position at this moment. Developments on lower level time frames need to be watched closely as to anticipate developments on the June monthly chart.

Chuck's Waves - World Gold Index

2011-05-31T11:33:00.000-07:00

SPX Weekly Chart - 27 May 2011

2011-05-31T03:56:00.000-07:00

     We broke the TD Demand Line (upsloping green line) in a qualified manner this past week by opening below 1340.35. This break increased the odds that we would close below that line on Friday and indeed we have. Such a qualified break gives a minimum objective of 1282.73 to the downside. Note that the medium (blue) moving average will be near this level next week. I am not predicting this objective will be met, only that it is a high probability target should the short (red) moving average fail to contain this decline.
     For me, the primary working point on this chart continues to be the qualified break (April 29) above the risk level of 1363.53. Since then the market has slumped and the question is whether we had a false breakout. My working hypothesis has been "no"; that we will see new highs without breaking below the 1294.7 level (the April 18 low).
     Why would the short moving average hold? The fact that we have failed to close below it for two weeks is not proof that it will continue to hold. A primary reason for my opinion is that the monthly chart is still positive. With a still-bullish higher time frame I prefer to view the RSI (top pane) in a positive rather than negative fashion. Instead of relying on possible bearish divergence, I am focusing on the still valid positive reversal (shown by the two arrows on the RSI which match the November 26, 2010 and March 18, 2011 price closes). This reversal calculates to a 1432.81 price target. If the RSI breaks below the blue line defining the positive reversal it will be negated.
     Bottom Line: The weekly chart is in a bullish position and the allocation mix meter is at +100%. Although currently still expecting new highs there are clear events that would tell me I am most likely wrong; a breakdown in the RSI, a close below the short moving average and, primarily, price violating the 1294.7 level.

SPX Daily Chart - 26 May 2011

2011-05-27T03:17:00.000-07:00

     Thursday's session began with the cash SP500 breaking down through 1318.47 and heading towards TDST Support. The low of the day was then made above that support level and we rallied through resistance at 1322.93 and then above Wednesday's high to confirm the close above the long (green) moving average. The morning decline also held the support area defined for bull markets in the hourly RSI.
     Upside resistance levels today will be right at the open (weekly short moving average is at 1325.89), 1332.5-1335.5 (daily short/medium moving averages), and then 1336.00 (TD Supply Line). Support remains at the long moving average (1321) and TDST Support (1312.62).
     Bottom Line: The allocation mix meter remains at +100%. I am still expecting to see new highs before the April low is violated.

SPX Daily Chart - 25 May 2011

2011-05-26T04:48:00.000-07:00

     The cash SP500 index continues to move sideways, holding TDST support while the RSI holds the bull market support area. Although I am not quite convinced that the decline has seen its lows, there was a bullish divergence between price and the RSI yesterday morning on the hourly chart.
     A good way to continue the rally would be for yesterday's close above the Long (green) moving average to be confirmed. That would point to a test of the other moving averages at the 1335.5 level. I will be watching 1322.93 and 1318.47 early today to see which way we break.
     Bottom Line: The allocation mix meter remains at +100%. I am still expecting to see new highs before the April low is violated.

Chuck's Waves - Dollar Index

2011-05-26T02:51:00.001-07:00

SPX Daily Chart - 24 May 2011

2011-05-25T04:03:00.000-07:00

     Yesterday I laid out four items that I would be watching regarding the cash SP500 data.
     1) If Monday's close below the long average can be confirmed on Tuesday. It was not confirmed and would indicate a bounce towards overhead resistance (medium and short moving averages).
     2) whether we continue to hold TDST support, So far we have but the bulls need to see price move away from it!
     3) whether the RSI (top pane) can hold the bull market support level, So far we have, but like with TDST support, we remain (if you are bullish) uncomfortably close.
     4) whether a bullish divergence forms between the RSI and Composite. This did not happen and must be considered a disappointment for the short term bullish case.
     Overall, yesterday's session can only be said to be mildly encouraging for the bulls. TDST needs to hold here.
         Bottom Line: The allocation mix meter remains at +100%. I am still expecting to see new highs before the April low is violated.

SPX Daily Chart - 23 May 2011

2011-05-24T03:57:00.000-07:00

     The cash SP500 did not confirm its close above the short (red) moving average last Thursday and sold off after reaching the TD Supply line. The downturn in price on Friday put a negative reversal in place in the Composite Index (middle pane) with a calculated minimum target of 1314.52. That target was reached yesterday as we closed below the long (green) moving average but managed to avoid breaking TDST Support at 1312.62. Note that yesterday's drop below the Demand Line can be considered a false break.
     For today I will be watching to see; 1) If the close below the long average is confirmed, 2) whether we continue to hold TDST support, 3) whether the RSI (top pane) can hold the bull market support level, and 4) whether a bullish divergence forms between the RSI and Composite. These four markers will tell us a lot about the short term direction of this market.
         Bottom Line: The allocation mix meter remains at +100%. I am still expecting to see new highs before the April low is violated.

SPX Weekly Chart - 20 May 2011

2011-05-23T02:23:00.000-07:00

     The primary working point on this chart continues to be the qualified break (two weeks ago) above the risk level of 1363.53. Since then the market has slumped and the question is whether we have a false breakout on our hands. My working hypothesis has been "no"; that we will see new highs without breaking below the 1294.7 level (the April 18 low).
     As far as Demark counting goes, this week's price flip means that the next possible signal would be a ~~sell setup~~ sequential countdown; which, if it were to occur, is now a full ~~nine~~ six weeks away. [Correction made 7:43 am on 23 May]
     Note that we can break the Demand Line (upsloping green line) in a qualified manner this week by opening below 1340.35. Doing so increases the odds that we will also close (on Friday) below that line.
     Let's also review the RSI (top pane). One can make the case that a bearish divergence has occurred just at the time we had a potentially false breakout above the risk level. However, I was not buying it two weeks ago because of the positive reversal shown by the two arrows on the RSI which match the November 26, 2010 and March 18, 2011 price closes. This reversal calculates to a 1432.81 price target. If the RSI breaks below the blue line defining the positive reversal it will be negated.
     Bottom Line: The weekly chart is in a bullish position and the allocation mix meter is at +100%. Although currently still expecting new highs there are clear events that would tell me I am most likely wrong; a breakdown in the RSI and, primarily, price violating the 1294.7 level.

SPX Daily Chart - 19 May 2011

2011-05-20T04:10:00.000-07:00

     The cash SP500 market opened higher yesterday, immediately confirming Wednesday's close above the medium (blue) moving average. A pullback then occurred when the TD Supply line was reached, but the bulls regained their legs and managed to close the market above the short (red) moving average. To signal a continuation of this move higher it would be ideal to see that close above the short moving average confirmed today.
     Perhaps the more immediate problem for the bulls is the Supply Line sitting at 1344.58. The only way to get a qualified break today is to open above it. A failure to do so, or a failure to qualify yesterday's close above the short moving average leaves the market vulnerable to the potential negative reversal forming in the Composite Index (top pane). If both price and the index were to turn down today it would mean a likely return back into the blue support box.
     Finally, keep in mind that the market will be fighting over the 1337.38 number today. See the last Weekly chart update for the reason.
     Bottom Line: The allocation mix meter remains at +100%. I am still expecting to see new highs before the April low is violated.

SPX Daily Chart - 18 May 2011

2011-05-19T03:40:00.000-07:00

     The cash SP500 sold off into the lower support zone (blue box on the chart) on Tuesday and then reversed higher to close above the medium (blue) moving average yesterday. To signal a continuation of this move higher it would be ideal to see that break above the moving average confirmed today. If it is, the next upside event to watch for will be a close above the short (red) moving average.
     There is resistance (in part due to the short moving average) right above the market from 1341-43 this morning and a TD sell setup was completed on the hourly chart yesterday. If this can't stall the price action this morning then I would expect a strong upward day.
     Bottom Line: The allocation mix meter remains at +100%. I am expecting to see new highs before the April low is violated.

Chuck's Waves - CRB

2011-05-18T04:36:00.000-07:00