Thursday, September 26, 2013

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The markets are at an inflection point according to the 4 hour TD Buy Setup on the S&P 500 (SPX). Here are the possible outcomes using TD Sequential’s interpretation. 

(1) >> The SPX is currently on an 8 count of TD Buy Setup and likely will complete a final 9 count today by closing under 1697.61 today. If a 9 count is recorded and TD Buy Setup is ‘perfected’ with an intraday print lower than or equal to SPX 1691.88, then there is a propensity of a bullish reversal.

(2) >> If a 9 count TD Buy Setup is recorded but does not ‘perfect’ by not printing a low that is lower than or equal to SPX 1691.88, then there is a chance it will ‘perfect’ on Friday. This is a trickier aspect of this TD Buy Setup but many times a delayed ‘perfected’ 9 bar usually results in a low that is only marginally lower than the target low. 

(3) >> A close above 1697.61 today negates (1) and (2) above since TD Buy Setup has been reversed with a bullish price flip and a rally is free to commence.  

(4) >> Finally, if the market does slice under 1682.22 and closes under it, that is a sign the overall markets are showing bigger problems. With the VIX showing complacency, the markets can unwind in a high degree than what bulls have been used to.

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My original plan was to stay short and allow the 4 hour TD Buy Setup to play out entirely but this morning’s bull run was getting too far ahead of my closing stop price at SPX 1697.61 and I closed out near the highs of the day. It is too difficult to reposition short now with TD Buy Setup near the end so I will be looking to go long in accordance to the four outcomes listed above. Also note the daily SPX’s TD Buy Setup will be interrupted with a Friday close above 1701.84 so that will be a good risk parameter to keep tabs on for tomorrow.  (updated intraday)

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