Anything Left In The Tank?

For reasons recently stated (see posting of 8/8/13 for example) the daily chart is now bearish. If there is any fuel left in the bullish tank it doesn’t look like a lot. However, it may be enough to produce one more high. That scenario would occur if we have not yet completed the trending impulse pattern from the June 24th low.

Such a scenario would imply a fourth wave contracting triangle as depicted in the attached chart. If correct it means that one last and most likely short, fifth wave up is required. A price projection for such a fifth wave is calculated and is of some interest. We get targets of 1706-08 (challenging the last high); 1718-20 (associated with the risk, or stop loss, level on the TD Combo signal of 1718.66); and 1738-43 (aligned with the next TD Trend Factor target which is shown in purple on the chart).

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.

An RSI/Composite Divergence

The cash S&P500 pulled back yesterday as it appears that we have completed the end of wave 3 in a suspected five wave impulse sequence from the June 24th low. Note the Fibonacci confluence area of 1)Wave 1 projected from the end of wave 1 (the boxes); 2) the retracement of Wave 2; and 3) Wave 1 projected from the end of Wave 2.

At the July 22 closing high the RSI (top pane) indicator poked to a new high for the move while the Composite Index (middle pane) did not. I believe this bearish divergence marked the end of wave 3 as oftentimes the composite will record its max reading with wave 3 of 3.

In my ideal scenario: going forward the current fourth wave pullback will be followed by a rally to a new high that is accompanied by another bearish divergence with the RSI/Composite and a DeMark exhaustion signal. Right now the TD Combo is on countdown bar 11 (shown in the chart) and the Sequential is on bar 9. Such a high would then have to be placed within the larger price structure.