We had a downtrending price bar form yesterday on the cash S&P500 daily chart. It also made the high of 11/14 a price pulse Change-In-trend. The upward price pulse from the 11/15 low ended at last Friday’s high and we have a new downward price pulse developing from that point.
As I stated yesterday,”The way we break out of the small range day made on Friday will tell us volumes about the near-term direction of the market”. We broke out to the downside and this has caused me to review my work.
The main purpose of this blog is to force myself into a much more rigorous and methodical approach to my analysis. It is obviously needed as I made such an obvious mistake I could kick myself. Luckily I never was filled on the long-side and so the mistake was not one I had to pay for in real dollars. But it is embarrassing just the same. More so since it is being acknowledged in this public forum.
On Wednesday morning the 14th of November I wrote, “…finally got a technical “buy” signal! Both the Composite Index and Derivative Oscillator (shown on today’s chart under the RSI) turned up after making higher lows than the RSI (top indicator).” This is fine and good but then I ignored the indicator. FATAL ERROR. Today’s chart shows the Composite Indicator on top of the price chart. Notice that the indicator just made a higher high than it did on November 6 (these points are noted with the blue arrows). The higher high came with a lower price. This is a Negative Reversal and warns that the earlier buy signal was early. This negative reversal signal was in-place as of last Thursday.
Since these signals often come in fourth waves I have posted a very intriguing wave count. Could we be in the latter stages of a Terminal Impulse pattern? If so we are ending the “c” wave of the pattern that started at the July high.
Let’s see what happens. Any rally from here will result in new technical “buy” signals. The swing trading system I am trying to develop (another reason I use this blog to document my thoughts) will not let me do anything until such a signal is generated.
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