Monday October 7, 2019

SPX - DailyWith the very negative reading from the ISM Manufacturing report last Tuesday, October 1, the proposed market rebound took place at a lower starting point, right down at the daily TDST Support levels. The S&P 500 (SPX) averted a selloff by closing above 2887.94 TDST Support level. (Aside – Two consecutive closes below TDST Support level with a TD Buy Setup 1 through 3 provide the strongest bearish initiation). Going forward, this is clearly the level to watch to gauge continued market weakness.

QQQ -DailyThe Nasdaq ETF (QQQ) shows a similar pattern. The one difference versus the SPX is the QQQ had one close below the TDST Support level at 185.03, but there was no follow-through as the QQQ closed above 185.03 the following session.

IWM - DailyThe Russell 2000 ETF (IWM) is a bit of an anomaly and a bit more challenging. The October 1 and October 2 candles closed below the TD Risk level at 149.10. Following a rules – based methodology, that’s a signal to abandon any bullish views. But there is a corollary to bring more context. The first is TD Buy Setup was already extended. Unless the market is in crash mode, the IWM was too oversold and it was already expected the IWM was ready to attempt some level of price recovery. Another was the TDST Support level was 2% away from the TD Risk level, which would make it a low probability for TD Buy Setup to continue extending with lower lows. Finally, both the SPX and QQQ were able to close above their respective TDST Support. This should help temper expectations of a further selloff in the short term. Intermediate term, the inability for the IWM to follow the SPX and QQQ suggests selling pressure will return.


 

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6 Responses to Monday October 7, 2019

  1. Dave Seremek says:

    Could you please explain the difference between calculating the TD Risk Level and the TDST Support Level?

    • Art says:

      The TD Risk level can be considered as the stop price. Using TD Buy Setup as an example. When a TD Buy Setup is recorded, TD Buy Setup @8 or TD Buy Setup @9 will record the true low. The next step is to take the high low difference on the TD Buy Setup @8 or @9 bar that records a true low, and subtract the difference to the bar that records the true low. TDST Support is price support. It is derived from the previously recorded TD Sell Setup. It is simply the true low of the TD Sell setup.

  2. Dave Seremek says:

    Thank you Art!

    Lastly, I remember you using something called the TD Trend Factor. How is that calculated?

    • Art says:

      That’s slightly more involved. But basically when the market drops at least 5.5%, TD Trend Factor can be applied to project upside targets using different multiple ratios from the true low or true closing low. The most common ratio is 1.1112 and 1.1668 for upside projections. The bull market has brought out ratios well beyond those. If you want to dig deep, all the TD information can be found in the book, DeMark Indicators by Jason Perl.

  3. dan says:

    Hi, regards the TDST line, when a price closes below the TDST and then next day or so it rampages above with strong bullish candle, does that mean its just a reaction and back down or does it invalidate the line?

    • Art says:

      Using a bullish perspective, if the price closes below the TDST Support level with TD Buy Setup 7-9 counts, followed by a bullish candle, that’s a good bullish indication. If the subsequent candle takes it below the TDST level again, although not ideal, the bullish element still exists. Utilize TD Risk level in case the structure is still bearish and the strong candle was merely a reaction. Using a bearish perspective, if the price closes below the TDST Support level with TD Buy Setup 1-3 counts, followed by a bullish candle above the TDST Support level, followed by another trip below the TDST level, it can still be considered bearish. If price trades above TDST again, it is likely a trading range is forming.

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