And so the rally continues; although at this point I am still happy to categorize it as counter-trend. Here is an update on the information I am currently watching:
1) Interplay between price and the indicators. Instead of both indicators, only the composite index (middle pane) is threatening a negative reversal right here. Last time we looked the RSI was higher than it was on August 23 while price was not. This potential negative reversal was never actualized as the RSI never turned down. However, it still is leading price higher. More concerning is that the composite indicator is now higher than it was at the August high. Again, if this oscillator was to turn down from here we would have a bearish negative reversal in place. We’ll have to watch and see if that happens.
2) Price Pulse. It is now clear that the August 28th low marked the end of Beta pulses on both the intermediate and medium-term (see weekly update) levels. As mentioned in the last daily post, Price Pulse theory indicates that a move above the previous Alpha pulse high (1669.51) turns the market bullish on the intermediate level. It will now take a move below the recent August 28th low (1627.47) to turn it back bearish.
3) TD Sell Set-Up. The cash S&P500 is on bar 5. Bar 9, if we were to reach it, would occur this Friday.
Bottom line: While the daily chart remains bearish, Price Pulse Theory indicates that the rally has further upside potential in both price and time. Even if a stronger rally develops here I expect it to fail to make new highs. We would then reverse and go on to make even lower lows.
