The Rally From June 24 Continues

Over the last couple of days the market has continued to advance and the futures are strong this Thursday morning. We have now surpassed the June 18th high of 1654.19 and yesterday we had a qualified break of the TD Trend Factor target (horizontal purple line at 1647.09). If it is confirmed today the next target is at1738.66 – a new high.

However; with the weekly chart (see Monday’s post) bearish I don’t expect a new high to be made. Any price flip on the daily chart would trigger a TD Sequential “sell” signal. There are two Fibonacci resistance zones to watch which are marked on the chart: 1660-1662 and 1673-1675.

At a Short Term Decision Point

On June 25th I said “the best I can see for the bulls is a rally that peters out by July 8. I can even see the June 18th high of 1654.19 being broken – but not the May high. This is not a prediction or what I expect but the best case bull scenario I can envision.”

Well here we are on July 8th approaching the June 18th high. Now what?

With the weekly chart (see yesterday’s post) being bearish I don’t expect the May high to be broken. The daily chart is now showing a completed TD Sequential Countdown (since TDST support held) with the TD Trend Factor target (horizontal purple line at 1647.09). These two factors hint that at least a short term reversal is very near; but they are only a hint. Let’s see what develops over the next couple of days as the trend factor target and June 18th high are challenged.

May High Marks End of Upswing on the Weekly Chart

There have been a couple of developments on the weekly chart since I last commented on it in the June 23rd posting. First, at that time (June 23rd) the break of the Beta-X trendline (see above chart)  was not yet qualified. It was qualified the following week but immediately invalidated by the rally this past week. As a bear I want to see this break qualified and validated as we go forward. Do note, however, that the Beta-X trendline may now be acting as resistance to the price action.

A second development is that the TD “Buy” Setup count has reached 4. I use a Buy or Sell Setup count of 4 as a “swing” chart filter. The resulting swings are then used to determine the trend and are shown on the attached chart in orange. Thus the trend is now down from the May high.

These two developments keep me negative on the weekly chart at this time. The June 23rd posting explained the technical weakness (bearish divergence between the RSI and Composite Index; a TD Combo 13 sell signal and a TD Aggressive Sequential 13 sell signal) present in this chart; and none of that has changed.

Bottom Line: I believe the May high will hold and that we are in the initial stages of a new equity bear market. Any move above the May high will prove me wrong.