The equity markets continue to circulate around the highs, setting up a possible pattern similar to the beginning of the year when the daily SPX TD Sell Setup reached the 9th bar. Illustrating the precarious short duration timeframes, the 4 hour SPX chart never recorded a TD Buy Setup from mid January through early February, therefore the unfinished TD Sell Countdown and TD Combo Sell are carrying over to present time. Between the previous and present TD indicators, they are all coming in bunches, signaling unfavorable risk/reward for the short term. But it still remains to be seen if there will be a serious spillover for a larger degree selloff as the weekly charts are have a bit more room to finish their respective counts – more details below.
S&P 500 (SPX) SHORT TERM OUTLOOK: NEUTRAL
Revert back to bearish if SPX cannot close above 1839.81 end-of-day.
Following the annotations on the chart above, TD Sell Countdown carried over a 12 count and completed a 13 last week. This was achieved by recording a print that matched the close of bar 8 at 1842.37. As a side note: These are the standard TD Sell Countdown rules. The rules can be modified and even encouraged to create new variations. The most common is TD Aggressive Sequential where a count is recorded when a high (as opposed to the close) is higher than the high, two bars earlier.
For TD Combo Sell, the previous 9 count back in mid January is still active and will record bar 10 when the 4 hour chart records a close above 1848.44. The Combo is also competing with an existing count which already at bar 12.
S&P 500 (SPX) SHORT/INTERMEDIATE TERM OUTLOOK: NEUTRAL
Switch to bearish with a close below SPX 1828.75.
S&P 500 (SPX) INTERMEDIATE/LONG TERM OUTLOOK: NEUTRAL
Flip to bearish if SPX weekly closes below 1797.02 (bearish price flip moved forward a week)
If the S&P 500 continues to propel higher every week, recording a higher high and a higher close, judging by the the current TD Sell Countdown and TD Combo Sell counts, the SPX has about 3 more weeks before signaling a stronger warning to become cautious. Note the waning momentum on the S&P.
S&P 500 (SPX) LONG TERM OUTLOOK: BULLISH
Flip to neutral if SPX (monthly) closes below 1756.54 (updated February 3rd.)