Roadmap for the Next Few Months

At this juncture I believe that the cash S&P500 will be in rally mode at least until the Autumnal Equinox and possibly until Thanksgiving Day (late November). This means that until that time the index will be making higher highs and higher lows as defined by the Level 3 Price Pulse. The Alpha pulse has been underway since the July 8 low. The next pulse in the sequence, Beta, should make low by September 2 and the Delta pulse to follow should make high between the equinox and the end of October. At that point we should be in position to determine whether the entire rally from March is over or whether it will extend further with a Level 3 Y pulse.

Using TD D-Wave (Tom DeMark’s mechanical version of Elliott Wave) on a yearly chart of the Dow Jones Industrial Average from the 1932 low yields the following count: Wave 1 high in January 1973 at 1067.20; Wave 2 low in December 1974 at 570.00. The Wave 3 high has yet to be confirmed. On the cash S&P500 chart we would need to close a calendar year below 879.82 to show that the all time high of 1576.09 was the Wave 3 high. I do expect this to happen by 2010.

Dropping down in time to the Quarterly chart, TD D-Wave shows that since the 1974 low we have had a complete five wave sequence. Wave 1 ended at the 1976 high; Wave 2 at the 1980 low; Wave 3 at the 2000 high; Wave 4 at the 2002 low and Wave 5 at the 2007 high. This help explains the deep bear market since then.

On the monthly chart TD D-Wave shows that wave A down from the 2007 high ended at the March 2009 low of 666.79. At this point we will not have confirmation that wave B up is complete unless we have a monthly close below 735.09. Again, this is most likely to occur in 2010.

Continuing downwards in time, the weekly chart of the cash S&P500 shows that wave A up from the March 2009 low ended at the June high of 956.23. We just got confirmation that wave B ended at the 869.32 low of July 8 this week. This means that wave C up from the March low is underway now. I believe that this wave C up will end with the previously mentioned Level 3 Delta or Y pulse.

On the daily chart I expect the TD D-wave to show either an A-B-C or 1-2-3-4-5 pattern up from the July 8 low. Again, this wave sequence should conclude the rally from the March low. How will this sequence unfold? My current road map for the next few months is shown, the red boxes being the target time and prices for the Level 3 price pulses.

Let's see what unfolds. I will adjust as market conditions warrant.

TD Sell Setup In Place - Time for a Pullback?

The cash S&P500 soared on Thursday reaching the immediate TD Trend Factor and Fibonacci target. We have now completed (and perfected) a TD Sell Setup. Often times the Sell Setup indicates at least a short term top; but not always. I note here that we do not have a technical “sell” signal (using the RSI and Composite indicators) on the daily chart. We've also easily sliced through TDST resistance at 946. These two facts argue strongly against becoming bearish here. That being said it would be perfectly natural for a pullback to occur.

Running Out of Steam in the Short Term?

Although momentum is slowing we had another up trending price bar Wednesday on the cash S&P500. We are now at day eight of a potential TD Sell Setup. The setup was perfected yesterday and so only a closing price today below 940.38 will prevent it from occurring -- this will be the next short-term item to watch for.

Right now the daily chart is bullish (with the most immediate upside target at 968) but we've now run up against the monthly short term moving average (see the June update post of July 4th) at 962. Any decline from here will be a pullback in the new up leg that began on July 8.

Rally from March to Last At Least Into Autumn

Another up trending price bar on Tuesday as the bulls have now pushed the cash S&P500 back above the June 11 high. In my cycle work (price pulse theory) the break above 956.23 (June 11 high) implies that this is a new up leg in the rally that began in March. It (the Level 4 Alpha pulse) began at the 869.32 low and will last at least until the Autumnal Equinox.

The Level 4 Alpha pulse will be composed of at least three pulses on Level 3. Currently on Level 3 an Alpha pulse is underway from the July 8 low. There will be a downward Beta pulse and an upward Delta pulse to come before this rally from March 2009 can complete. The latest (in time) Delta should complete is by the end of October.

On Level 2 we are getting towards the end of a Y pulse. In fact, the completion of the Y pulse may be coincident with a TD Sell Setup. We are on bar seven (see today’s chart) of such a nine bar setup now. Today will become bar eight as long as we don’t close below 940.74.

Right now the daily chart is bullish with the most immediate target at 968.

June 11 High in Sight

It was an up trending day on Monday as the bulls have made a qualified break of the TD Supply line (shown by a downward sloping red dashed line on the chart). If confirmed today (on any print above 951.62) it projects to 1020.56! The next TD Trend Factor target lies at 968.68. Note also that the swing chart has turned back up and we’ve made a qualified break of TDST resistance (horizontal red dashed line). Let’s see if the bulls can make the final assault on the June 11 high today.

In my cycle work a break above 956.23 (June 11 high) implies the rally that began in March will last at least until the Autumnal Equinox. My bearish view will be abandoned on a move above 956.23.

Retesting the June 11 High

The inside price bar and down close on Friday have set the bulls up to qualify a break of the TD Supply line (shown by a downward sloping red dashed line on the chart). That line stands at 942.97 this morning. If broken and confirmed it projects to 1020.56!

Any price above 943.96 this coming week will confirm the break on the weekly chart (see Sunday‘s post). In my cycle work a break above 956.23 (June 11 high) implies a rally that lasts at least to the Autumnal Equinox.

My bearish view will be abandoned on a move above 956.23.

Weekly View: Bulls on the Threshold

As was speculated here last weekend the failure to break cleanly below 869 on Monday has lead to a bounce in the equity market. That bounce is threatening to become more; perhaps even a new upward leg in the rally that began in March.

The up trending price bar on the weekly chart of the cash S&P made a qualified break of the current TD Supply line (downward sloping dashed red line on the price chart). That break, if confirmed, projects to a minimum target of 970.21. Any price above 943.96 this coming week will confirm the break. More importantly the break of the supply line promises a move above 956.23 (June 11 high); which in my cycle work, implies a rally that lasts at least to the Autumnal Equinox.

Bottom line: I will take on a bullish view for the next couple of months if we break above 956.23 this coming week.