Monday, November 30, 2020

There are more than enough conditions for a top. Bullish sentiment is frothy, and many DeMark price exhaustion signals have shown up on individual stocks and indices. The one pushback is the seasonal factor. This year end window dressing should not be discounted especially in a year where 2020 recorded both a bull and bear market. Here’s a projected timeline through year end. Since the four hour SPX never overlapped the previous TD Sell Setup @9 by trending higher away from it, that kept bullish the expectations moving forward. Now that it has recorded a TD Sell Countdown @13, it has met the criteria for price exhaustion at least on a short term basis. Add the potential recording of a TD Sell Setup @9 at the end of next Tuesday’s close, this sets up a drawdown early next week.

Supporting the short term selloff is Tesla (TSLA), which has a large part in keeping the Nasdaq ETF (QQQ) afloat. TSLA can record a TD Sell Setup @9 at the close of Monday, November 30th, but the strong momentum should bring in more buyers as any price dip in TSLA is considered a buying opportunity. 

Currently both the daily SPX and QQQ have an active count of TD Sell Setup @3. If the proposed selloff early next week materializes, but does not reverse the TD Sell Setup by price flipping bearish, look for a larger potential drop on December 7th where the daily SPX and QQQ can record a TD Sell Setup @9. From there, expect some backing and filling until TD Sell Countdown @13 is recorded. This trendless backing and filling will keep everyone guessing until the last week of December where markets are traditionally bullish. Should the indices price flip bearish either in the SPX or QQQ before December 7th, it will require another updated analysis. 

Note the TD Risk level on the SPX at 3634.75. The SPX closed above the level to end the week. This provides more upside potential. Crossing above and below the level indicates a trading range.

The daily small cap Russell 2000 ETF (IWM) has a similar structure in terms of the DeMark counts. To keep the bullish structure, IWM should not trade down to the cluster of TDST Support levels at 175.

If markets follow through the December narrative, this brings in the weekly SPX, where it can record a TD Sell Setup @9 right in the first week of January, 2021. If the daily charts record 13’s around this time, this is the ideal time to get really bearish. We’ll track this narrative as the days go by. 

Chart of daily Bitcoin (BTC/USD). Bitcoin suffers from an identity crisis, but right now, it is an asset class as it correlates with equity markets. If SPX should selloff early next week, this may show Bitcoin can foreshadow equity markets. BTC’s recent selloff has TDST Support levels at 15879, the 12 hour timeframe, and 15293.04, the daily timeframe. Expectations will have these levels hold and challenge the all time highs once again. If there is a breach of these TDST levels over the weekend, that’s an indication both the crypto and equity markets are in trouble. 

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Monday, November 23, 2020

Equities are now in the realm of a good sized correction from an intermediate/long term view as displayed by the weekly charts for the major indices. First, the weekly S&P 500 (SPX) recorded a TD Sell Setup @9 ending September 4th and has been trading sideways. This is the classic definition of TD Sell Setup as 9 counts pauses the momentum before taking the next path higher or lower. The weekly close also gave us a bearish candlestick pattern highlighted in the chart’s gray circle above. The pattern formation is a doji candlestick followed by a bearish engulfing pattern. If this plays out immediately next week, the first bearish confirmation is trading below 3536.76. More details on that level later.

Next is the weekly Nasdaq ETF (QQQ). The QQQ recorded a TD Sell Countdown @13 ending October 16th. While the chart itself looks constructive, the TD Sell Countdown @13 serves as an active warning as long as the QQQ stays under 309.21, the TD Risk level. Another bearish signal can be added if a TD Combo Sell records a 13 in the near future. If this were to happen next week, the requirements would be a weekly closing high above 294.61 and a high print at 299.14 or higher. 

Lastly, the weekly Russell 2000 ETF (IWM) is one week away from recording a TD Sell Setup @9 which is another warning. Putting all three indices together indicates a material selloff is ready to go.

For the short term – Seasonally this part of the year should be bullish and that is the current stance through the end of the year. By then, the weekly charts shown above should be fully maximized on their respective counts. If this view is deemed incorrect, it will show up early in the week by breaking below 3536.76, which represents the 30/60/90 minute TDST Support levels. Note a qualified break below that level is a vacuum which provides the SPX potentially to drop to the two hour TDST Support at 3272.09. 

If bullish seasonality does plays out, the daily DeMark counts will recycle higher. The first indication would see the SPX trade above 3634.75. Reiterating, the current status is to expect more upside, but with the weekly charts in price exhaustion territory, it’s prudent to stay cautiously bullish. Add the current environment of speculative excess with FOMO trading in EV stocks, and the put/call ratio down to extreme levels, it puts the market in topping mode. If we have it our way, a return to volatility will begin year end or the first part of 2021.

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Monday, November 16, 2020

The week ahead could be complicated with multiple paths. In an attempt to make things easier, here’s some context from the recent week. Last Monday’s gap higher due to Pfizer’s vaccine announcement drove the S&P 500 (SPX) to unusual highs with a violent rotation from growth to value stocks. At Monday’s close, the SPX recorded a TD Sell Setup @5 with a high of 3645.99, which probably moved forward the market high that was expected later in the week earlier than expected. The daily SPX ended up closing the week with a perfected TD Sell Setup @9 even though Monday recorded a high of 3645.99. >>TD Sell Setup is perfected since the high of TD Sell Setup @9 is greater than the highs of TD Sell Setup @6 and @7. For TD Sequential purposes, this indicates price exhaustion for the close of Friday. << This tells us to be on alert for some give back for the upcoming trading week. However, the give back may be brief…

Given last Monday’s unusual move, it’s entirely possible last Monday marked the high and and the following Tuesday marked the low as the difference equates to 3.67% which is enough to draw dip buyers in, and draw in more buyers as demonstrated by Friday’s close. The SPX on Friday also overcame some key short term resistance levels, which gives credence the low is already in. At the same time, the two hour SPX recorded a TD Sell Countdown @13 to go along with the daily SPX TD Sell Setup @9. This sets up the expectation for at least a minor drawdown. If the SPX has trouble trading above the TD Risk level at 3606.19, that’s a sign of a pending selloff. Putting everything together in simplest terms, expect some choppy price action going forward.

If equities do take a turn for the worse, the Nasdaq ETF (QQQ) displays the best defined support and resistance. It is currently bounded by the lower 30/60 minute TDST Support at 283.46 and the crowded upper 15/30/120 minute TDST Resistance range between 295.58 and 296.35. Break below 295.58, this will help validate stocks are staring at a deeper selloff.

An alternative and the cleanest way to decipher direction for the upcoming week is through the daily Apple (AAPL) chart. Since AAPL is heavily weighted in QQQ and SPX, it makes a good proxy for the indices. AAPL has an active TD Sell Setup @7 and is about 2% away from its TDST Resistance level at 121.55. This gives the clearest indication of pending price exhaustion next week as it nears a TD Sell Setup @9. The end interpretation is price exhaustion Monday or Tuesday which is consistent with the SPX analysis.

Given the data points that is given to us so far, the script is to expect near term weakness or choppy trading this week and maybe through next week, but bigger picture, the rally should continue as the weekly SPX is trending bullish. Trading above 3580.84, the two day SPX TDST Resistance level, solidifies the bullish picture.

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Monday, November 9, 2020

The S&P 500 is on a bullish run and it looks favorable through year end. If more confirmation is needed to justify the current momentum, a break above the two day SPX’s TDST Resistance at 3580.84 would help that narrative. If this can be achieved before a recorded TD Sell Setup @3 (by next Wednesday’s close), that sends a good message the rally is durable. 

The daily SPX currently has an active TD Sell Setup @4. Conjoining the 2 day chart, the best bull case would be to see the SPX break above 3580.84 and record a TD Sell Setup @9 by next Friday, November 13th. If price aligns with the TD Trend Factor at 3773.36 at that time, a retracement lower would strongly be considered. 

Here is the near term hurdle as shown on the four hour SPX. The four hour timeframe has recorded an unperfected TD Sell Setup @9 right under the designated descending trendline. If Monday’s open gaps upwards, the opening gap could fail as the TD Sell Setup @9 is perfected. However, as long as price does not overlap the current TD Sell Setup, there is likelihood of a bullish continuation. The more time the SPX spends overlapping the TD Sell Setup range, the continuing rally narrative needs to work itself out sooner than later or the rally is in jeopardy. 

Longer term, the weekly SPX has consolidated since recording a TD Sell Setup @9, and has a chance to lateral from TD Sell Setup to TD Sell Countdown. 

Gold (GC) looks poised to break out above $2000 and not hit the daily TDST Support level at 1795.20. More analysis will be needed as it closes in the ~2100 highs to judge if gold is renewing a bull leg or just in a protracted consolidation period.

Bitcoin is on a run to challenge ~20k level, the all time high made back in December 2017. The current weekly counts are TD Sell Setup @6 and TD Sell Countdown @9 and interestingly, it is on course for a possible reversal sometime in December 2020 – three years from the previous all time high. BTC will require more scrutiny as it gets closer to those price exhaustion counts, especially if BTC is trading near 20k.

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Monday, November 2, 2020

There are many variables going into next week given the uncertainties surrounding the US elections. Here’s the breakdown of what could happen besides the large swath of price movements as volatility is elevated. The four hour S&P 500 (SPX) chart recorded a TD Buy Setup @9, which sets up at least a temporary reprieve in selling. To even consider a bull case, the SPX would need to target above the very short term 10/15 minute TDST Resistance levels ~  3332. If that is achieved, then any retest of the lows (currently 3233.94 as of Friday, October 30th) stands a chance of holding during the week of the US elections. 

From the primary timeframe, the daily SPX has an active TD Buy Setup @5 which is indicative that price exhaustion to the downside has not been fully realized. If the counts stay active with a TD Buy Setup @7 by next Tuesday, then the following day Wednesday could set up as a possible sell exhaustion day with a TD Buy Setup @8 or next Thursday with a TD Buy Setup @9. This would also mean the closing low of the week at 3233.94 would be broken lower, but sets up a good risk/reward case to buy the market. 

The alternate is if the TD Buy Setup count should be interrupted with a bullish price flip (TD Sell Setup @1 on Tuesday’s close). If this is the case, and the SPX is below 3332 at the time, this opens the potential for a more severe selloff, especially if the daily closes below the 3204.13 TDST Support level.

Bottom line: A close below 3204.13 with a daily TD Buy Setup @1 or @2 is bearish.

The weekly SPX priced flipped bearish. The 3115.70 TDST Support level is the one to watch if a multi week selloff is in the cards. 

Monthly SPX can record a bearish price flip if the close on November 30th is below 3271.12. Collectively, the charts are on the cusp of more downside risk. 

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Thursday, October 29, 2020

Equities were not able to hold a bid as it decisively broke the S&P 500 (SPX) TDST Support level at 3408.16. The current drawdown from the October 12th 3549.85 recent high is 7.9%. From here, both the two and four timeframes are converging for a price exhaustion level either late Thursday or early Friday around the 3200 level. This should hold until the US elections, November 3rd. 

Focusing out, what needs to be pointed out is the two day TDST Support at 3220.26. A close below this on a 2 day basis should heighten the senses that the market is not just in a corrective phase, but something more dire. Overshoot below 3220.26 is OK. It’s the close that holds the importance. 

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Monday, October 26, 2020

There were expectations for the S&P 500 (SPX) to navigate towards the highs near the 2 hour TDST Resistance level at 3534.21 last week. Although the actual outcome was a pair of lower lows, the pattern looks corrective from the larger trend, and from the 60 minute chart above, both the 60 minute TDST Support level at 3396.39 and 120 minute TDST Support levels at 3408.16 held up which keeps the path higher intact. Note the short term TDST Resistance levels at 3507.74 and 3534.21 are the next point of review. 

With the prolonged range bound trading, the TD Setups for the longer time frames have been reset. The daily SPX ETF (SPY) is shown since there are clear notations the SPX does not have. From the daily SPY, the recently recorded TD Sell Setup @9 is not perfected since the @6 candle is higher than the @8 and @9 candle. To reach true price exhaustion, the SPY would need to trade at or exceed 354.02. Also shown is the SPX chart to show the equivalent levels from the SPY. The perfected level would be 3549.85 and the TDST Support equivalent would be 3354.54. 

The Weekly SPX still has an active TD Sell Setup @3 and TD Sell Countdown @3. These counts are indicative of a continuing bullish trend longer term.

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Monday, October 19th, 2020

The S&P 500 (SPX) was not able to maintain a TD Sell Setup as of Friday’s close, but the recent pullback was a typical 3% drawdown that did not harm the overall bullish picture. The next challenge is to determine if there is more upside or the recent high at 3549.85 marked the high. This will require a look at the neighboring timeframes to help trace the next move. The TD Trend Factor at 3566.34 was included as a reference point.

From the two hour timeframe, the SPX was able to react to the TD Buy Setup @9 with a high retracement off the 9 count. It would be natural for the SPX to retest the TD Buy Setup @9 candle at 3440.45 one or two times before pushing higher towards the 3534.21 TDST Resistance level. 

Assuming 3440.45 holds and the SPX continues higher, the two day SPX is nearing price exhaustion with a potential TD Sell Setup @8 on Tuesday, October 20th and TD Sell Setup @9 on Thursday, October 22nd. The minimum price to perfect the count is 3534.01 (perfected if TD Sell Setup @8 or @9 is higher or equal to TD Sell Setup @6 and @7). From there, we should complete enough upside and challenge the 3220.26 TDST Support level again. 

Weekly SPX showing a text book response to the TD Sell Setup @9. It is positioned to either lateral to the TD Sell Countdown phase or challenge the 3115.70 TDST Support level. The longer it spends above the February, the more it favors TD Sell Countdown. 

Consensus narrative from analysts a month ago was a volatile October. That has not really materialized. Rather the SPX is in the midst of a bullish leg. Adhering to the DeMark indicators, we should see more upside but it looks capped based on the TD Sequential counts on some primary timeframes around the daily. Unless we see a selloff that breaks under the previous low at 3440.45, watch the the 2 hour SPX along with the 2 day SPX timeframes. From there, things can get bumpy when these timeframes reach their designated price exhaustion signals.

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Monday, October 12, 2020

The daily S&P 500 (SPX) had two opportunities to gain sell side traction last week, but those opportunities were switch in favor of the buy side. The confirmation came when the SPX cleared the two hour TDST Resistance level at 3428.92. This places the SPX in the territory to chase the highs at 3482.11. There will be an imminent pullback but as long as the previous TDST Resistance level holds at 3428.92 or there is no bearish price flip on the daily timeframe, the SPX has the ability to capture the area near the highs at 3428.92. 

The daily Nasdaq ETF (QQQ) has the same look. The two hour TDST Resistance level at 280.28 was teased before confirming higher. 

The daily Russell 2000 ETF (IWM) has a different imprint. The IWM played catch up and did it in a hurry, and thus has recorded a TD Sell Setup @9. Since it’s at price exhaustion levels, some level of selling should occur. As long as it holds the 159.12 TDST Support level on a two hour basis, the collective market is still bullish. Bullish confirmation is a break above the drawn TD Risk levels at 164.52 and 165.68. Also watch the relative continued outperformance of the IWM over the SPX and QQQ. The continued outperformance is bullish. 

The daily iShares 20 year ETF (TLT) was in a compressed range as expressed from the TTM_Squeeze indicator and initiated lower to the downside. It has recorded a TD Buy Countdown@13, and it should waver here before the next move. Fundamentally with continued trillion dollar fiscal and monetary packages, major moves should be higher. 

The daily US dollar index (DXY) is in the realm of resuming the downtrend. The four hour TDST Support at 92.926 provides the last level of support for buyers. Below 92.926, the DXY risks breaking under the 91.956 TD Risk level. 

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Monday, October 5, 2020

The S&P 500 (SPX) on the four hour timeframe recorded a TD Sell Setup @9 at 3397.18 which marks the high for the base scenario of a wide trading range between the daily TDST Support at 3204.13 and 3397.18. Moving forward, the SPX should at least test the lows at 3273, the four hour TDST Support level. If the daily TDST Support level at 3204.13 is to be broken for additional selling, ideally it should occur early in the week. 

The daily SPX showing what’s at stake. The SPX reversed price flip bearish and if it should breach 3204.13, the maximum selling potential occurs if the daily SPX records a TD Buy Setup @2 or @3 below 3204.13.

Looking further out with the weekly SPX, the momentum lower stays intact as long as the SPX closes the week below 3340.97.

The monthly SPX updated.

The SPX on the quarterly timeframe. By closing above the 3253.05 TD Risk level, this gives the first indication of higher prices in the months ahead. For further confirmation, 3253.05 needs to hold by the end of the year.

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