SPX Daily Chart - 22 Sep 11

     A retest of the Beta pulse low is now underway in the cash SP500. After yesterday's sell off it is extremely unlikely that last week's break out on the weekly chart will be confirmed. This comes on the heels of the RSI/Composite bearish divergence on the daily chart. 
     As mentioned yesterday, the retest of the Beta pulse low may result in yet another bounce attempt. However, since the Beta low was actually broken, the price pulse model is now negative. Surprisingly I am beginning to see hints of bullishness appear! The first was cited yesterday on the daily REI. It showed the likelihood that we would bounce upward after the test of the beta low. Now I want to also point out that the RSI is at a critical juncture as it tries to hold the area reserved for support in bull markets. Even if it can't hold there today it is possible that a bullish divergence may form with the August 22 low on any close below 1123.53. Finally, today may turn out to be bar 12 of a daily sequential buy! 
    Bottom Line: My current idea is that the break of 1136.07 signals that the downtrend has resumed. Am I being too hasty in this decision? Perhaps the real retest is of the August low (previous x pulse bottom)? Today will give us more information, as will the new weekly chart. For now  my mechanical allocation mix meter has fallen to 25%.

SPX Daily Chart - 21 Sep 11

     After yesterday's sell off it might seem that the RSI/Composite bearish divergence and the weekly chart analysis of "the downtrend being close to resuming" was reasonable. In fact, note that we are on the verge of not confirming the weekly break out (see the weekly post). This also seems to put the odds in favor of the bearish case.
     And although I think the bearish position will be right over the coming weeks I am not convinced that the bottom will fall out here - if only because the daily REI is showing a strong up trend from the Beta bottom. But maybe this is just a reflection of typical delta pulse strength? Possible delta pulse strength means that a retest of the Beta pulse low may result in yet another bounce attempt. It will be critical to see if the Beta low is actually broken. If it is, then even if we get a bounce (even as far as the 1245-47 area), we can anticipate that lower lows are likely ahead of us.
    Bottom Line: I think the bounce/consolidation from the August low is either running on fumes or over. A break of 1136.07 will convince me that the downtrend has resumed - even if another bounce up ensues. My mechanical allocation mix meter is at +50% but would drop to 25% on a break of that 1136.07 level.

SPX Daily Chart - 20 Sep 11

     As far as my analysis methodology goes, yesterday's price action did nothing but mark time. The next upside target area is 1245-47. It is interesting to note that at this level delta will equal alpha in length.
    Bottom Line: I think the bounce/consolidation from the August low is running out of steam. A break of 1136.07 will convince me that the downtrend has resumed. My mechanical allocation mix meter is at +50%.

SPX Daily Chart - 19 Sep 11

     The ongoing bounce/consolidation in the cash SP500 was given a warning blow yesterday when the Composite Index (middle pane) bearishly diverged with the RSI (top pane). This divergence warning is not foolproof; but when combined with the conclusions reached from the weekly analysis it seems likely that the downtrend is close to resuming.
     While we watch for other confirming evidence that the bounce is complete, keep in mind that we are now in a delta pulse. Not only is Delta usually the strongest upward pulse in a cycle, it is the primary place where divergences of the sort just mentioned are prone to fail. Nevertheless, if this delta pulse turns out not to be stronger than the preceding alpha it is another bearish warning. The next upside target area is 1245-47. It is interesting to note that at this level delta will equal alpha in length.
    Bottom Line: I think the bounce/consolidation from the August low is running out of steam. A break of 1136.07 will convince me that the downtrend has resumed. My mechanical allocation mix meter is at +50%.

SPX Weekly Chart - 16 Sep 11

     It was a strong week for the cash SP500 as both the long (green) moving average and supply line (red dashed) were broken in a qualified manner. If those breaks are confirmed this week then the bounce from the August low is alive and well. However, as before, I think that the short (red) or medium (blue) moving averages is the best we might get before the larger downtrend asserts itself.
     Besides the reasons spelled out last week, another piece of evidence supporting an ultimately bearish resolution is the REI indicator shown in the top pane. The fact that the REI has been oversold (below the bottom blue line) for six weeks now indicates a trending market. In such a case we should look for the downtrend to reassert itself with a new low being made over the coming few weeks.
     Bottom Line: For this week it will be important to see if we get confirmation of the upside breaks of the long (green) moving average and the supply line (dashed red line). A failure to confirm would be bearish. The allocation meter is at a +50% and I am expecting the August low to give way after this consolidation/bounce completes.