Weekly Chart Review, September 20, 2009

With another up trending price bar on the weekly chart the TD Setup sequence has now reached 10 bars. As Mr. DeMark states in his book New Market Timing Techniques, the appearance of a new Setup sequence “… either Before, On, or After the 13 Countdown days and prior to the first price flip day will produce a Recycle.“ He then goes on to provide further options that Jason Perl also recommends. That is, you can ignore such a subsequent setup if it is smaller in price than the previous Setup or larger than 1.618 times in price of the previous Setup. Therefore, since the current Setup is now greater than 100% but less than 161.8% we must recycle our Setup. This changes the Sequential and Combo counts to those shown in the chart. Bottom Line: There are no longer any pending Sequential or Combo “sell” signals on the weekly chart.

We do, however, have a perfected TD Sell Setup in place. If a downside reaction is to take place in response it will usually happen within 4 price bars. I like to look to other indicators for confirmation that a Setup might be a bearish development. First off I watch the interplay between the RSI and Composite indicators. Currently the RSI is at a new high for the move but the Composite is falling. This would be bearish divergence *if* the RSI were to turn down from here. As an aside, please note that the RSI is threatening to break upward through the range typically associated with bear market resistance. Combining the position of the RSI with a perfected TD Sell Setup tells us that we are at an important market juncture; although sometimes it always seems like that!

Another item of interest is that the Long moving average (solid green line) is virtually at the week’s price high and also coincident with the TD Trend Factor target of 1079.38. Oftentimes these moving averages identify important support and resistance levels. Will it now? The key over the coming week will be what happens on the daily chart. As you know, that chart just completed a 9-13-9 “sell” pattern.