A Monthly 9-13-9

While I wait to see if the Price Pulse Confirmation Line (see last few posts) gets broken on the daily chart it is always instructive to take a technical look at the newest higher level time frames. Attached is the new monthly bar chart of the cash SP500.

Of note is the pending 9-13-9 “sell” signal generated by DeMark analysis. I use this signal in a conservative fashion – to me it is not activated until we get a price flip. For that to occur in June we would need a June closing price below 1514.68. On the other hand, this sell signal would be negated on a confirmed break of the 1659.11 level (shown by the horizontal cyan colored line). Such a confirmed break will not happen in June.

Another reason to be very cautious regarding equities?

Elliott Wave Count SPX 5 Mar 2012

Ten Year Bond Yields (Weekly)

     Today's look at the yield of the 10 year bond is most interesting from a TD Sequential point of view. But first a quick note on the wave structure.
     Once a 21 bar price low was recorded after the end of wave 'b' on April 9 we could look for the end of wave 'c'. This occurred on May 7. Wave 'c' was certainly complete once we had a 13 bar price high after that point, which just happened on November 19. Thus we can say that a complete Flat pattern has played out from the June 2010 high.
     Wave 'a' of this flat was accompanied by a TD Buy Setup (the number 9) and bullish divergence between the RSI and Composite indices (shown above the price chart). We then had a nearly 100% retracement rally to the wave 'b' high.
     A TD Countdown 13 posted on June 25 but, although accompanied by a RSI/Composite divergence was not followed by a 'price flip'. Instead a new TD Setup followed which completed on August 20. After a minor corrective bounce it was followed by a new low. However, since it had another RSI/Composite divergence with it we were justified in placing a buy stop loss at 24.26 (the horizontal cyan line on the price chart). This line never had a confirmed break and then a final (third in the series) RSI/Composite bullish divergence led to the current rally and the end of the Flat pattern discussed above.
     Tomorrow we will look at the daily chart to see what has happened since the end of the Flat.

Weekly Chart Update for September 4, 2009

In the first week after a completed TD Combo #13 the weekly chart of the cash S&P500 has printed a down trending price bar. The price action last week broke and qualified the TD Demand line which gives us a downside price objective of 972.14 *if* the break is confirmed this coming week. An open next Tuesday above 1014.90 is one way we can get fail to confirm. The other would be to not make a new low. In either of these two cases the momentum would switch to the bull side, and we would then have to watch to see if we break 1029.13 (TD Supply Line). If we do we will have qualified the supply line and odds will then be quite high that a new price high is in the cards.

Can we reconcile a move to new highs even though we recently completed a TD Combo “sell“ signal? Yes. First off, recall that the risk level associated with that signal is at 1062.74 (shown as a bright red horizontal line on the chart). The “sell” signal remains in effect unless we get a qualified and confirmed break of this level. With that in mind it is interesting to see that if next week prints a TD Setup bar #9 we can also lose our Combo signal if the market exceeds 1063.01. Notice how the two techniques seem to reinforce each other by being so close. My point here is that as long as we don’t exceed 1063.01 next week we must still be wary of an impending trend change from bullish to bearish.

Bottom Line: The weekly chart took on a bearish tone when we broke 1014.91 last week. However, I did not expect the mid-August low of 978 to be broken and I still don‘t without a new high that is recorded on or after September 21. However, if the bulls want to ensure that the rally has continued staying power they need to break 1063.01 before “time” runs out. After the equinox I would be very careful; particularly since this past week just produced another RSI-Composite index bearish divergence.

Looks Like th Correction is Underway

Yesterday’s down trending day in the cash S&P500 has brought the index down to the short moving average (solid red line) at 993. This price action has broken and qualified the TD Demand Line (up sloping dashed green line). Confirmation today requires that we close lower than 1004.41 and trade below 992.40. Such confirmation projects 982.87, coincident with a Fibonacci level and should be viewed as the next level of support. Below that lies 961 (Fibonacci and TD Trend Factor).

Bottom Line: I think the evidence favors the view that the pullback associated with the Level 3 Beta pulse (see the July 25 post) is underway. I believe that; as a minimum, 961 will be hit; TDST support (875.32) will hold and that the correction will be complete no later than September 2. After that the rally resumes. But first this correction!

Odds Now Favor Pullback

The cash S&P500 printed an “outside” day on Thursday. After exceeding Wednesday's high within the first 15 minutes of trading we went on to make a lower low than Wednesday. This lower low confirmed Wednesday’s break of the TD Demand Line and negates the previously very bullish 1332 price objective. Now we not only have a technical “sell” signal (bearish divergence between the RSI and Composite indicators) in place, but the aggressive version of TD Combo hit bar number 13 yesterday (chart shows the regular version which remains on day 12).

And so the evidence now favors the view that a pullback is underway. Is it the Level 3 Beta Price Pulse pullback (see my post of July 25th) that I have been watching for? Under my current roadmap the Beta low will be in by September 2. Definitive proof that the pullback is underway would still be provided by a break of the July 29 low of 968.65. Failing that we would need to see yesterday’s high hold through August 21. Although not definitive, a failure to break yesterday’s high by next Tuesday would strongly favor the view that the anticipated August pullback is underway.

Conclusion: With our bullish TD Supply Line projection negated, a technical “sell” signal in place and an aggressive TD Combo sequence completed the odds now favor a pullback. An initial wag at a downside target would be somewhere between 922 and 955. I still expect new highs before the Autumnal Equinox.

Monthly Chart Review - May 2009

It was an uptrending month as we continued the rally from the March low of 666.79. Note that there was a “perfected” TD Setup on the February 2009 price bar. Does this formation mark the completion of the bear market? I don’t think so as there was no technical “buy” signal in my key indicators – the RSI and Composite Indices. There is neither a divergence between price and the RSI (top pane) or between the RSI and the Composite (middle pane).

Without a supporting signal in my key indicators I am forced to interpret the action since the March bottom as a bear market rally. The question then becomes “how high will we bounce before the down trend resumes?” To answer this question I like to calculate targets using Fibonacci, Gann, TD Lines and TD Trend Factor; looking for areas where the techniques overlap. Note on the chart that we have pushed through the 23.6% retracement but it was not “qualified” in the DeMark sense. This makes me first focus on targets below the 38.2% retracement level.

That leads me to look at my Gann moving averages (red, blue and green lines). I then note that the short moving average (red) is sloping down to intersect the TD Trend Factor target of 973.83 (purple line) over the next month or so. It also must be noted that we are currently “stuck” at resistance provided by the TD Trend Factor of 922.54 and the TD Supply line projection of 925.99. This is the area that has led to a sideways moving market since May 8. Lastly I want to note targets from the Square of Nine: 1012 is conjunct the March low (and aligns with the higher 38.2% Fib level as well as the TD Trend Factor target of 1027.98). 971 and 930 are both Trine and align with the two previously discussed targets. I therefore feel comfortable with 930, 971 and 1012 as targets.

Once we get to a target it is time to check the next lower time frame for evidence of a reversal. We are at the first target now. I will review the latest weekly chart tomorrow.