Shiftless 1979 300SD

[Telfair]

I just got this car and have been working on it steadily now for about three weeks. Rear end, rebuilt seats, new bumpers, steering box, alignment, vacuum leaks, motor mounts, and on and on. amy problem now is that when I stop the car or slow down significantly it does not down shift and if I step on the accelerator it freewheels like it's in neutral. If I downshift to S it will accelerate normally thru the first three gears and the I must manually shift to 4th. Is it the modulator valve, a bad tranny, or what? I really could use some help. Thanks