Thursday, February 27, 2014

A few weeks back, Tom DeMark charted out a frightening analog of 1929’s free fall path. That chart path was invalidated practically the day after he made (on air) specific steps what the market needed to follow. Now he’s coming out with a statement the SPX can potentially see 1885 in about three weeks. The three weeks is consistent with the weekly outlook posted last Monday, and while there is viability in that target, we’ll take it one step at a time as markets are a living entity and conditions change fast where least expected.

As for today, it’s another Janet Yellen testimony but to expect any guidance change will be a stretch, since non-farm payrolls is coming next week. It would be uncharacteristic for her to signal any policy changes prior to the release and ahead of another FOMC meeting two weeks after.

The Fed is anxious to unwind QE and yesterday’s housing sales surge may be front running a rise in rates. The Fed is data dependent and aside from housing, economic data has been soft keeping the specter of uncertainty inside the Fed. The safest route for the equity markets if the Fed just keeps the cheap money coming.

Doing some chart readings on the weekly TNX, the proxy for the 10 year treasury notes, the TNX is sitting near the 25.89 (or 2.589%) TDST Support level. If the emerging markets do not flare up and rates drop under the 2.59%, this should support the US equity markets as it signals the Fed’s caution to continue to taper. By holding above the TDST Support level, rates are free to rise again and depending how erratic rates rise, equity markets will enter a path to the unknown. Image



Switch to bearish if SPX if the following conditions are met: SPX does not probe above 1850, SPX probes under 1836.78, and SPX does not close above 1845.31. (Alternatively, SPX closes below 1836.25, the daily bearish price flip)

ImageImageYesterday’s last hour action was encouraging from a bearish perspective but nothing has been confirmed yet. Although a break under the SPX daily price flip at 1836.25 will signal a sustainable short term trend, the above roadmap for today will be enough to front run the daily flip. On the flip side, both the 2 hour and the 4 hour SPX charts still have an active TD Sell Countdown and TD Combo Sell. The Combos will require another high.



Switch to bearish with a close below SPX 1836.25 (last updated yesterday).



Flip to bearish if SPX weekly closes below 1797.02 (updated February 24th). 



Flip to neutral if SPX (monthly) closes below 1756.54 (updated February 3rd).

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