Weekly Chart Remains Bearish

This chart remains bearish. Here was the three step process that culminated in a bearish rating:

1) A TD Sequential countdown bar #13 on August 2,

2) The cash S&P500 had bearish divergence confirmed between price and the RSI (top pane) on August 9, and

3) A price flip occurred on August 16.

The associated “stop loss” (or risk) level is at 1737.48 (horizontal cyan line).

On this chart, the next bearish development would be to confirm that the August 2 high also marked the end of 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. However; 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 postings on waves) 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.

Monthly Chart - August 2013

Attached is the new monthly bar chart of the cash SP500 (bottom pane). The top pane contains the Relative Strength Index (RSI) and the middle pane the Composite Indicator. In the July monthly posting I pointed out a potential bearish divergence between RSI and the Composite Index. After August’s action we now have actual bearish divergence. This is the second of three requirements I have to turn the chart bearish.

The first requirement is to get a potential DeMark “sell” signal. In our case we had a 9-13-9 (labeled in black on the chart) “sell” signal generated in April 2013. However, note that price closed above the “signal abort” level of 1659.11 (horizontal cyan line) in July. This meant that the new high recorded in August aborted that signal so that it is no longer active.

Another DeMark “Nine” is shown in green at the May 2011 high. The subsequent Sequential countdown reached 13 in May of this year. Again, that is a potential “sell” signal. The “abort” level associated with this signal is shown by the horizontal cyan line above the market at the top of the chart at 1793.08. The third requirement I have before classifying a chart bearish is the triggering of a DeMark signal by a price flip. In this case we need to close September below 1630.74.

In candlestick parlance, August was a “Dark Cloud Cover.” Here is what Thomas Bulkowski (http://www.thepatternsite.com/DarkCloudCover.html) has to say about this pattern:

1. Reversals occur 60% of the time with this pattern.
2. It ranks 22 (out of 103) in performance which means that price has a tendency to trend after a reversal.

To me the above shows why a price flip is important before calling the action bearish.

Finally, the price pulses and waves. A cyclical bear market rally (from the 2009 low) within a secular bear market decline (from the 2000 high) is often composed of an ALPHA-BETA-DELTA sequence. The Alpha and Beta pulses in such a sequence are shown in red on the chart. These are what I call the ‘super long term’ pulses. The ‘long term’ pulses are shown in green. Creating an Elliott Wave count using the latter we can see a ‘Double Three’ pattern close to completion. Extremely interesting is that TDST Support (horizontal dashed green line) aligns with the ‘B’ wave of the A-B-C Zigzag from the October 2011 low.

Bottom Line: The monthly chart continues to edge closer to being classified as bearish. I put a 25% weighting on this chart (as I do with the weekly and daily). I have recently cut back to a 50% equity exposure. A price flip in September on the monthly would drop that down to 25% (assuming the weekly and daily stay bearish). Stay safe!

Weekly Chart Just Needs a Price Flip

The technicals associated with this chart continue to be supportive of potential price exhaustion since we now have an actual bearish divergence between price and the RSI (top pane). This is particularly of interest since we have a TD Sequential countdown bar #13 in place. Now I am waiting for a price flip to trigger a “sell” signal. In this case a close next week below 1692.09 will do the trick. To be balanced we should also point out the associated “stop loss” level of 1737.48.

The Beta-X trendline is shown in blue. This is used as an aggressive “sell” trigger in the price pulse investing scheme. I believe we are very close to completing an Alpha pulse (at the blue color level). If so, the conservative “sell” signal would be for a close below the previous Z pulse low. This is also the low that must be broken for TD D-Wave to show the Triple Three count presented in the recent series of postings as complete. Please note that the count shown on the chart is not that D-Wave count but instead is based heavily on my price pulse work.

With the daily chart now bearish, the weekly close to flipping that way, and potential exhaustion showing up at the monthly levels one should be ready to move even further to the sidelines as far as the cash S&P500 goes.

We've Flipped

After completing a TD Combo countdown last Friday (shown in the chart), the cash S&P500 has produced: bearish divergence between the RSI and Composite Indicator as well as between the Derivative Oscillator and price, a break in the low level Beta-X trendline, and now a price “flip” (close less than the close 4 bars prior). The daily chart is now bearish. The only good news for the bulls was that we held 1681.86 yesterday. This allows for the possibility that another push higher is still possible before the trending impulse pattern from the June 24th low is complete.

The risk, or stop loss, level on the TD Combo signal is 1718.66. I would not be surprised to see that challenged over the next week or so even if we are at an upward exhaustion point.

Closer ....

The cash S&P500 completed a TD Combo countdown last Friday (shown in the chart) while the Sequential is on bar 11. We are now quite close to triggering this potential “sell” signal at this time frame. With Combo or Sequential I prefer the conservative approach by demanding a price flip. That would occur today only with a close below 1685.73. If we continue higher my Fibonacci work shows a target area at the 1726 to 1743 level with the TD Trend Factor target at 1738.

As shown in previous posts, the potential bearish divergence between the RSI and Composite Indicator continues. Today I want to show yet another developing bearish divergence – this time between price and the Derivative Oscillator (top pane). Note the bullish divergence that accompanied the price low in late June and compare that to the bearish divergence developing now. This can’t be good for the longevity of this rally. 

As for the price pulses and wave count there are no changes since my last post on the daily chart. And so we have the monthly, weekly and daily charts all on the verge of declaring an upside exhaustion event. Caution!