Pent Up Demand at the Open?

So far the bullish divergence between the composite index (middle pane) and RSI (upper pane) has led to nothing but a price consolidation. Indications are that the cash market will pop at the open due to “pent up demand” over the long weekend but for how long will that last? If the rally can’t hold we’ll have to see how price does at the TD Trend Factor target (purple line at 1614.62) as well as the Beta-X trendline (in orange). A close beneath this trendline will significantly raise the chances that the trending impulse pattern from last November is complete.

Bottom line: The daily chart remains bearish. Even if a rally develops here I would expect it to fail to make new highs and then go on to make even lower lows.

A Bullish Divergence Appears

The highlight of today’s chart is the bullish divergence between the composite index (middle pane) and RSI (upper pane). This is particularly interesting at this juncture since I can count five waves down and we are in the SLOT (the 50-78.6% retracement area which I have drawn as a box on today’s chart). This is the area where we should assume that support will hold as price pulls back from a new high.

If this divergence proves false we’ll have to see how price does at the TD Trend Factor target (purple line at 1614.62) as well as the Beta-X trendline (in orange). A close beneath this trendline will significantly raise the chances that the trending impulse pattern from last November is complete.

Bottom line: Chart remains bearish. Even if a rally develops here I would expect it to fail to make new highs and then go on to make even lower lows.

And The Bounce is Done

The bounce due to the bullish divergence between price and the RSI at the August 21 low is over of course. The chart remains bearish.

Price has now entered the SLOT (the 50-78.6% retracement area which I have drawn as a box on today’s chart). This is the area where we should assume that support will hold as price pulls back from a new high. The TD Trend Factor target (purple line at 1614.62) aligns well with the 61.8% Fibonacci retracement and is below the Beta-X trendline (in orange). A close beneath this trendline will significantly raise the chances that the trending impulse pattern from last November is complete.

Daily Chart Bounce

The bullish divergence between price and the RSI at the August 21 low has led to a bounce. Otherwise, not much has changed since the last daily posting. I still have eyes on the TD Trend Factor target (purple line at 1614.62). Note it is in the SLOT (the 50-78.6% retracement area which I have drawn as a box on today’s chart) with the next larger Beta-X trendline (in orange). A close beneath this trendliine will raise the chances significantly that the trending impulse pattern from last November is complete.

Bottom Line: The chart, as far as my practical use of it for asset allocation, remains bearish. Technically it can be upgraded to neutral due to the bullish divergence.

Daily RSI Signals Bear Mode

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

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

Another item of interest from the daily chart:

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

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

Anything Left In The Tank?

For reasons recently stated (see posting of 8/8/13 for example) the daily chart is now bearish. If there is any fuel left in the bullish tank it doesn’t look like a lot. However, it may be enough to produce one more high. That scenario would occur if we have not yet completed the trending impulse pattern from the June 24th low.

Such a scenario would imply a fourth wave contracting triangle as depicted in the attached chart. If correct it means that one last and most likely short, fifth wave up is required. A price projection for such a fifth wave is calculated and is of some interest. We get targets of 1706-08 (challenging the last high); 1718-20 (associated with the risk, or stop loss, level on the TD Combo signal of 1718.66); and 1738-43 (aligned with the next TD Trend Factor target which is shown in purple on the chart).

Keep in mind that any such thrust up would probably complete the TD Sequential countdown which has been stuck on bar #11 since August 2.