A Countdown 13 Bar Shows Up

After surging higher during the first half of Monday the market drifted lower during the rest of the day. Now the question is … is there more upside to come? New highs? Or was that it?

A bit strange is that a TD Sequential sell countdown completed yesterday. I use the word strange because it has laid dormant for quite a while. The TD Sell Setup that kicked it off registered back on July 9th (see chart). A more recent TD Sell Set-Up just completed (bar 9) last Friday. Precedence goes to the completed countdown because it’s associated setup is larger than the current setup. The associated risk level is at 1718.66 (solid horizontal cyan line). As usual, this is step one of my three step signal process (see posting on the August 31 weekly chart for an example).

Step 2 requires a technical signal. While the RSI (top pane) went to a new high yesterday the Composite Indicator (middle pane) drifted lower. This formation is not quite bearish divergence. Step 3 requires a price flip which has also not yet occurred.

As for the most recent sell setup, the associated risk level is at 1697.98 (horizontal dashed cyan line). It is interesting that we did not close above that level yesterday, ending at 1697.60 on the cash S&P500.

Bottom line: my view that we fail to make new highs, reverse and go on to make lower lows remains intact – but just barely. If yesterday marked an exhaustion event we should see some downside action today.

Weekly Cash SP500 Chart For September 15, 2013

Nothing new to say about this time level. With last week’s rally we can be confident that the recent low marks the end of the Medium-level Beta pulse. If so, and if our contention that this chart remains bearish is correct, the current Delta pulse up should fail to retrace back to the August 2 high.

Emphasis must now be placed on the daily chart.

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.

And The Bounce is Done

The bounce due to the bullish divergence between price and the RSI at the August 21 low is over of course. The chart remains bearish.

Price has now entered 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. The TD Trend Factor target (purple line at 1614.62) aligns well with the 61.8% Fibonacci retracement and is below 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.

Daily Chart Bounce

The bullish divergence between price and the RSI at the August 21 low has led to a bounce. Otherwise, not much has changed since the last daily posting. I still have eyes on the TD Trend Factor target (purple line at 1614.62). Note it is in the SLOT (the 50-78.6% retracement area which I have drawn as a box on today’s chart) with the next larger Beta-X trendline (in orange). A close beneath this trendliine will raise the chances significantly that the trending impulse pattern from last November is complete.

Bottom Line: The chart, as far as my practical use of it for asset allocation, remains bearish. Technically it can be upgraded to neutral due to the bullish divergence.

Weekly Chart Turns Bearish

This chart is now bearish. After recording a TD Sequential countdown bar #13 on August 2, the cash S&P500 had bearish divergence between price and the RSI (shown in the last weekly chart posting). With the stage set, we had a price flip to trigger a “sell” signal this week. The associated “stop loss” (or risk) level is 1737.48 (horizontal cyan line).

I believe we have now completed an Alpha pulse (at the blue color level). On this chart, an even more bearish development would be the confirmation that the August 2 high also marked the green level Y pulse (and hence wave 5 in the trending impulse pattern from the November 2012 low). Currently it would take a move below the June 2013 low to get that confirmation. An “early warning” signal for this event would be a close below the Beta-X trendline shown in blue.

Finally, note that the June 2013 low must still be broken in order to show the TD D-Wave Triple Three count (presented in the recent series of wave postings) as complete. Please note that the wave count shown on the chart is not that D-Wave count but instead one based heavily on my price pulse work. I use the D-Wave count in a corroborating role.

With both the daily chart and weekly charts bearish, one should entertain a sharply reduced exposure to equities.