This past week is a perfect example of why one should not anticipate signals in the technical indicators. In my last weekly report I noted “This week we note that although the RSI (top pane) has confirmed the new price high by making a new high itself, the Composite Index (middle pane) is lagging. This is *potential* bearish divergence between the two indicators.” Of course I then proceeded to have the mindset that the signal would develop, expecting a decline to start any day. Needless to say there was no price decline over the past week and at this point we face the same *potential* bearish divergence between the two indicators.
Since the weekly TD Sell Setup was perfected on June 1 the market has gone sideways for nine sessions. As I stated last week “Without a signal I favor the pullback / consolidation view. With a signal I would favor a much deeper retracement (move lower).”
Will we get our technical sell signal over the coming week? Who knows? But one “tell” may be associated with the upward sloping dashed green line on the price chart. This line has served as a good proxy for the “demand” of equities over the past few weeks and is why Tom DeMark (TD) labeled it as the Demand Line. It will be a sign of weakness if the price action falls away from this line; indicating a fall off in demand.
If demand for equities does not fall off here recall that the next price target from the monthly chart is at the 970 level.
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