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.