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?

Delicately Poised

The cash S&P500 formed a downtrending price bar on Wednesday, retesting the prior 930 resistance area to see whether it has become support. So far it has held. I continue to look for a 1 to 3 day pullback (today would be day 2) followed by another thrust towards 970. Of major interest will be whether the weekly price bar closes lower. That weekly close is even more important now …

Two significant developments took place yesterday that demand attention. First, the Relative Strength Index flashed a bearish divergence with price (see upper pane of daily chart). Secondly, the 949 high is in Opposition to the 666.79 low recorded at the start of this rally in March and 950 is Square to March 6. This price action is a clear caution to think about protecting any profits generated by the rally from the March low and will force me to change my short-term view if we can not close higher on a weekly basis.

With the market poised at such a balance point the TD Supply (949.34) and Demand (902.95) Lines (dashed red and green lines on the chart) assume increased importance today. A move through either one would be qualified.

Bottom Line: I think we are nearing the end of the rally from March. A failure to close higher this week would lead to a multi-week corrective pullback. A higher close this week points to the rally extending to the 970 area where we have to watch for the start of a much deeper multi-week corrective pullback.

A New Week Begins

After a downtrending day on Friday the cash S&P500 appears to be in a weak position. If the L1 Beta pulse completed at Thursday’s low then the short-lived rally into Thursday’s high was the L1 Delta and the X pulse is now underway -- and should extend further downwards. On the other hand; if Beta is not yet complete, then it is very long-lived and points to an imminent Delta bounce upwards that is almost guaranteed to fail at making a new high.

We did reach the first TD Trend Factor price objective (purple bar at 878.45) Friday. This is also where the Level 2 Beta – X trendline (green line) can be found. If we can’t hold here the next support level is from 867 – 870. 870 is in opposition to 930 on the Square on Nine.

The experimental trade position remains short from 897.34; stop & reverse at 930.17.

Decision Time

The cash S&P500 opened above the TD “Supply” line shown on the posted chart (the downward sloping red line) last Friday. On Friday I stated that “If the cash S&P500 can open above that line today (852.55) expect the bulls to retest the high.” That retest is on! And, as explained yesterday, whether we can break above 875.23 is crucial. Break above that level and the bulls may go on a stampede. Will we? My best guess is no but it is just an opinion. The price action today should dictate trading actions.

The current upward moving Delta pulse (from Tuesday’s low of 826.83) should complete by Tuesday and we are in the timing window now. There are a multitude of Gann targets and Fibonacci targets on the daily chart that lead me to stick with the bearish view here:

1) 876 (our high so far) is 315 (+360) degrees on the Gann wheel from 667 (the March low).

2) 877 is Sesquiquadrate March 6.

3) 878 is square April 17.

Those three Gann targets support the notion that we peaked on April 17. The next three items argue that we will not break the weekly Supply line of 875.23:

4) 875 is square April 27.

5) Fibonacci cluster from 871.5 to 873

6) Fibonacci cluster from 875 to 876.

However, perhaps the best indication that the bulls are failing here would be the negation of the TD Supply line break of last Friday on the daily chart. This would occur if we fail to go above Friday’s high today.

Bottom Line: We should let the price action dictate our stance here. I still favor the bearish view that ultimately looks for a retracement of the March 6 to April 17 rally that goes below 780. However that view will be put in jeopardy with a move above 875.23