Monday, October 28, 2013

The primary theme for an end-of-the-year rally is still sticking. Since government obstruction and Fed tapering is pushed back in time, the theme is that those large money players will use this as an opportunity to get their benchmarks closer to par. From a technical perspective, look for S&P 500 (SPX) 1777 as the next level of caution for the bulls. 



Will switch to neutral if SPX closes below 1754.67. More conviction is given if it closes below 1751.97. Image

As with every melt-up, short term indicators will get extreme but the markets are not designed to reverse immediately when these extreme conditions arise. They can still scratch higher so allow it to play out with defensive measures. 



TD Combo Sell is close to recording a 13 to add to the already completed TD Sell Setup and TD Sell Countdown. If the market stays in melt-up mode, 1777 is the likely resistance point to observe the bull/bear commitment. Image

There is a Fibonacci extension target (1627.47 low, 1729.86 high, down to 1646.47 secondary low) that targets 1776.71. Adding confluence to the Fib extension, there is a half level TD Trend Factor drawn from the 1560.33 level, that sits at 1777.22. This will be a reasonable level for the market to at least pause especially in light of TD Combo Sell is about to record a 13.  



Most major indices will begin the week on TD Sell Setup @8 which is the beginning of the price exhaustion window. ImageImageImageImage

Most major indices are beginning the week on bar 8 of TD Sell Setups. This is essentially an inflection point. While the primary assumption is the market will experience some stoppage between now and the next two weeks, the focus is to see if the SPX can stay bullish and push the index from TD Sell Setup to TD Sell Countdown. There is some bearish confluence to the SPX inflection point by way of some simple trendline drawings. The obvious formation is what appears to be an Elliott Wave ending diagonal. If this plays out, the next leg down should be significant. The Dow is one outlier from the major indices as it just recorded a bullish price flip last week. If the Dow can overcome the resistance at the 15,650 area in the next couple weeks, then that will be a notch given to the bullish picture. 



Market is extended and within’ the risk level parameters of the 9 and 13 TD Sequential clusters in April and May. (last updated September 30th)


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