Which way will she break?

Although the price bar from yesterday must be classified as “uptrending” it was not the strongest day in history. In fact, our swing indicator remained negative and so the price pulse down is still in effect from Tuesday’s high. It was also a Reversal Day since we made a new high but closed below the open and yesterday’s close. My stop was hit on SH during Thursday.

Note on today’s chart how the long (green) and medium (blue) moving averages contained the price action. My ongoing belief is that we made a short-term (or greater) low on Wednesday. If the market can exceed yesterday’s high today the odds become 50/50 that the move from 10/11 is over. If we can keep the rally going into early next week I will become even more convinced.The bearish case is that an a-b-c correction is not the correct interpretation from the high. That count would be a 1-2-3 with the last few days being wave 4. This Elliott count would require a move to new lows over the next few days.

Bottom Line: Still waiting for a technical “buy” signal, or even a price fractal low or Change-In-Trend (CIT) of the price pulses. On the sidelines for now.

Buyers Appearing

We had a volatile day in the cash s&p500 yesterday. After a sharp sell off to a new low for the move down from 10/11 the bulls came charging in and rallied us strongly upward. When the dust cleared we still had a downtrending day! This caused a new price pulse to be formed from Tuesday’s high and we now have five pulses (not Elliott waves) down from the 10/11 high.)

Yesterday’s low and then sharp reversal came at the end of the time period where I was expecting a short-term (or greater) turning point. Due to that fact I have raised the stop on my remaining SH position to 58.99. If new lows are directly ahead then the odds become much higher that an a-b-c correction is not the correct interpretation from the high. Today’s chart shows a slightly tweaked zigzag when compared to yesterday (moved waves a and b over by one day). However, this zigzag shows nice symmetry where wave c is a Fibonacci relationship to wave a.

Bottom Line: I will let the market will take me out of my remaining SH position; my focus is finding a place to go long SPY here. That place is yet to be found as I don’t have a technical “buy” or even a price fractal low or Change-In-Trend (CIT) of the price pulses.

Retest Required?

The market (cash s&p500) carved out an uptrending day on Tuesday and I was stopped out of half my blog-related Investopedia SH position at 59.25. These blog related trades can be seen by anyone with a free investopedia.com account. Note that the upward moving price pulse from Monday’s low continues.

I still don’t have a technical “buy” signal to hang my hat on, and the index is running up into resistance provided by the medium moving average I follow.Perhaps a retest of Monday’s low is required before we can move higher in earnest. On the other hand, we are in the time period where I was expecting a short-term (or greater) turning point. If a low is in we should not make any new lows on this move down after today. For instance, if we were to make a fresh low on Thursday the odds would rise quite a bit that the correction has more to run.

To really get bullish I would just love to see the market sell off sharply today with a close below 1500.63 and a low above 1490.4. For now I will just keep the stop on my remaining SH position at 58.61.

Just a Bounce?

Monday saw another downtrending price bar on the cash S&P500 index and I raised my stop on the open Investopedia SH trade to 58.61. The difference from Friday’s downtrending bar is that Monday was a reversal bar. The downward moving price pulse from 1564.74 on 10/15 is over as a new upward moving pulse began at yesterday’s low. After overshooting our Gann & Fibonacci cluster at 1497 (the low was at the 1490 dynamic Gann line) the market has bounced. The question now is whether this is just a bounce or the start of a trend change.

If we are at a trend change then our Elliott wave iv’ down is most likely complete as a zigzag. It would have alternated nicely with the wave ii’ flat. The bothersome thing about this interpretation is that there is no technical “buy” signal in place on the daily chart at this time – just the reversal day bar pattern. On the other hand, we are in the time period where I was expecting a short-term (or greater) turning point. If a reversal is in the low should come by Wednesday.

Is a tradable low in place? Maybe, but I can’t act on it yet within my trading system. The price action has formed a reversal pattern but not a technical buy signal. What about the current short (long SH) trade? Since we are in a turning period time frame and we have had a reversal bar I will move my stop on half my position to 59.50 (just under yesterday’s low) and keep the stop where it is on the other half.

Bears Pressing Their Case

The cash S&P500 index traced out another very weak price bar last Friday, this time of the downtrending variety. The current price pulse remains firmly down from last Monday’s high and we are now just above the Fibonacci & Gann cluster around 1497. With that target looming close I will raise my stop on the open SH trade to 58.61 on any cash S&P500 reading of 1500.25 or less.

Our ongoing bull run and associated Elliott wave count from the August low is in jeopardy and I talked about this in my weekly chart posting yesterday. One measure of “bullishness” that I like to see is the RSI holding the 40 area on pullbacks. That indicator sits there now. If it goes lower that will be another strong reason to question the current impulse wave count. Of course, a move in the index below 1479.41 will kill the impulse count instantly as a fourth wave can not move into the territory of the previous first wave in a trending impulse pattern. From a timing viewpoint I think we will know by Wednesday.

Finally, today’s chart also shows that the long moving average I use is right at the market. There is technical support here for the s&p. Whether it holds it or not is another question.