Pent Up Demand at the Open?

So far the bullish divergence between the composite index (middle pane) and RSI (upper pane) has led to nothing but a price consolidation. Indications are that the cash market will pop at the open due to “pent up demand” over the long weekend but for how long will that last? If the rally can’t hold we’ll have to see how price does at the TD Trend Factor target (purple line at 1614.62) as well as the Beta-X trendline (in orange). A close beneath this trendline will significantly raise the chances that the trending impulse pattern from last November is complete.

Bottom line: The daily chart remains bearish. Even if a rally develops here I would expect it to fail to make new highs and then go on to make even lower lows.

A Bullish Divergence Appears

The highlight of today’s chart is the bullish divergence between the composite index (middle pane) and RSI (upper pane). This is particularly interesting at this juncture since I can count five waves down and we are in the SLOT (the 50-78.6% retracement area which I have drawn as a box on today’s chart). This is the area where we should assume that support will hold as price pulls back from a new high.

If this divergence proves false we’ll have to see how price does at the TD Trend Factor target (purple line at 1614.62) as well as the Beta-X trendline (in orange). A close beneath this trendline will significantly raise the chances that the trending impulse pattern from last November is complete.

Bottom line: Chart remains bearish. Even if a rally develops here I would expect it to fail to make new highs and then go on to make even lower lows.

Just Marking TIme?

For reasons recently stated (see posting of 8/8/13 for example) the daily chart is now bearish. However, there remains the possibility of another rally from these levels which would fall under the fourth wave contracting triangle idea as discussed in the last daily posting. epicted in the attached chart. If correct it means that one last and most likely short, fifth wave up is required. Keep in mind that any such thrust up would probably complete the TD Sequential countdown which has been stuck on bar #11 since August 2.

This short-term bullish option is enhanced by the composite index (middle pane) failing to make a new low yesterday with the RSI (top pane) and price.

The shortest degree (level I) price pulses I keep (not shown) will turn bullish on a move above 1700.18. At Level II we now have a Y-pulse confirmed complete at the August 2 high. A move above 1700.18 will confirm the Z-pulse is in at yesterday’s low. It would then still take a new high to turn Level II bullish but the upside looks very limited.

Finally … is the market just marking time? This Friday marks a very important Gann timing date. A taste … we have now moved 232 weeks from the 2009 low. Of course 233 is a Fibonacci number. But where is it on the Square of Nine?

Trend Change Averted .... For Now

We had an upside opening gap that was not filled during the trading session Tuesday. As explained yesterday, this means that the dip below TDST support was invalidated … the cash SP500 bulls continue to cling on! There were also a couple of other developments that lend support to the bullish case over the short term:

RSI Range. Although an oscillator, the RSI (top panel) can be used as a trend indicator as shown by authors such as Constance Brown. The decline from the May high is still holding the area reserved for bull markets (above the 38 level). Like with TDST support, Monday’s price action threatened to, but could not push this indicator into a bearish trend status.

Composite Index. This indicator (middle panel; invented by Connie Brown) has just made a bullish divergence with the RSI.

Right now 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. Let’s see what the bulls have.