Bull and Bears in the Endless Dance

Yet another downtrending price bar on the daily cash S&P500 chart. The downward price pulse from 1520.77 continues and that high price on 11/06 is now a fractal high.

The last technical signal on the daily chart was on October 10th when the Composite Index failed to confirm the RSI’s new high. That coincided with the 10/11 “b” wave peak in the weekly chart. As of this morning we are still waiting for a daily chart “buy” signal.

From an Elliott perspective my best attempt at a wave count is that we are in a “c” wave which is part of either an Expanded Flat or Triangle that began at the July high. If “c” is part of a Triangle it will itself be an “a-b-c” pattern. If part of a Flat it will be a “1-2-3-4-5”. In both of these options the “c” or “3” waves will themselves be five waves. Therefore, we may have just completed iii” of c’ or iii” of 3’ yesterday.

How low can the larger “c” go? Yesterday I laid out support levels from a weekly chart perspective. Today’s chart shows shorter-term support levels – and we reversed at one yesterday with a strong rally late in the day. The only thing I don’t like about this Fib cluster is that it is not accompanied by a Gann target.The next area of support does have a Gann target. That is the 1432-1438 area. Underneath that is the 1413-1417 zone mentioned yesterday. Notice all the hits there on today’s chart.

Bottom Line: I’m still on the sidelines. The market did not react at the 1468-1469.5 or 1459.5-1463 areas and I still don’t have a technical buy signal. Now I will watch to see whether previous support around 1490 has become resistance.

Back to the Drawing Board

The question has been answered. Not only did we not hold the October 24th low, but we also took out the supposed wave “1” top of 1479.40. Needless to say it was a very bearish day as we formed a downtrending price bar on the daily chart. The upward price pulse from 1489.95 ended at 1520.77 and we are now doing a new downward pulse.

Whenever I step off track (which happens too often I am afraid!) I like to step back and simplify. Going back to the weekly chart (shown in this post), I have been tracking the bearish divergence of the momentum indicators with price in my weekend posts. A “sell” signal was generated July 20 when the RSI failed to confirm the new high in price. I have been calling that top a wave “3” peak. We then formed three distinct price pulses to the downside. Next, the weekly chart formed an RSI “positive reversal” on August 10. In my post of October 6 I wrote “Last week I wrote about the positive reversal signal generated in the weekly RSI on August 10 that pointed to a calculated minimum target of 1548.54. This target has now been realized.” On October 19th the weekly chart produced yet another technical “sell” signal when the RSI again failed to confirm the price high. From the August low until that signal we had THREE clear price pulses to the upside.

To recap: we had a “sell” on July 20 followed by three waves down. A positive reversal on August 10 followed by three waves up. Another sell signal came on October 19. In my weekend posting for October 20-21 I wrote “We now have three distinct price pulses up from the August low. At one time I was viewing this action as an “A-B-C” Zigzag pattern. I have recently changed that view to a “1-2-3” of an Impulse pattern.” I now believe that was my big mistake.

At this point it appears that we are still in the corrective pattern that began at the July high. As labeled on the chart above the move down into the August low was wave “a” and the recent peak wave “b”. We are now in wave “c” of that correction; which is either an Expanded Flat or Triangle. Of course there could be other counts, but I will keep it simple for now.

The last technical signal on the daily chart was on October 10th when the Composite Index failed to confirm the RSI’s new high. This coincided with the “b” wave peak in the weekly chart. As stated in this blog more than once, we have not had a new technical “buy” signal since that point. As of this morning we still don’t have one.

How far will wave “c” go? The first support I note is from the short term moving average on the monthly chart. That is at 1468. My next Fibonacci clusters are at 1461-1463 and then 1413-1417. The weekly long term moving average is heading towards the lower area now (currently at 1400). From the recent high I have Gann Wheel targets at 1469.5, 1459.5, 1437, and 1421.

Bottom Line: I’m still on the sidelines. Let’s see how the market reacts at the 1468-1469.5 or 1459.5-1463 areas.

Dollar Woes Abound as SPX Continues to Hold Ground

The market continues to hold the 1489 area (the 10/24 low) and formed an uptrending bar yesterday. This ended the downward moving price pulse that began at the 10/31 high and began a new upward moving pulse from Monday’s low. I may sound like a broken record but I am still waiting to resolve the question: Can we hold the October 24 low?

A positive since October 19th is that the RSI has held the area associated with bull markets. A negative yesterday is that we rallied on lighter volume. A neutral is that we moved right up against the short term (red) moving average, which is also just about where the weekly Drummond geometry PLDot sits as well as the 50% retracement of the last price pulse. Thus, we might be up against at least short-term resistance and might have to test the low once again.

With the cash S&P500 being range bound since mid-October I have slightly revised the wave count on today’s chart. The bigger picture remains the same in that we still need one more move to new highs to complete the five wave pattern that may have begun at the August lows. The main change is that I now have the fourth wave (iv’) of the pattern ending at Monday’s low as a Flat from the October 11 high. However; if four is not complete we may see continued choppy action over the coming days as the pattern continues to evolve.

One reason I changed the count is to better reflect the symmetry and balance in the impulsive price action from 8/28 to 10/11. Working within this area provides a nice Fibonacci cluster at the high (see chart).

Bottom Line: I’m still waiting to see if we can make a bottom. As stated once before, the “ideal” way to end this consolidation would be to close below 1500 (without breaking 1489) while the RSI stays above 40.17 setting up bullish divergence. Is it possible to have an “ideal” outcome? We’ll see!! Meanwhile I remain on the sidelines.

Quick Update in Waiting Mode

Yet another downtrending bar has formed on the cash S&P500 index as we fell to within a whisker (0.39) of the October 24 low. The downward moving price pulse that began at the 10/31 high continues.

We are still waiting to resolve one key question: Can we hold the October 24 low? The market again managed to stay above that 10/24 low of 1489.56 but seems to be hanging by a thread on the long term (green) moving average.

Bottom Line: I’m still waiting to see if we can make a bottom. I also want to see whether 1489 can hold and; more importantly, 1479. I remain on the sidelines.

Hammering Out a Bottom??

We saw another large downtrending bar develop in the cash S&P500 on Friday. However, unlike Thursday, we closed higher on the day. This price action has now caused the 10/31 price bar to contain a fractal high. Even with a higher close on Friday, I must also note that the downward moving price pulse that began at the 10/31 high still continues. This forces us to face the key question: Can we hold the October 24 low?

The market managed to stay above our “do or die” 10/24 low of 1489.56 but was it a reversal bar? No. At least it wasn’t a Reversal Day; Signal Day, or Snap-Back Reversal Day. How about from a candlestick perspective?

The following is from the stockcharts.com candlestick dictionary: "Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during an advance, then it is called a Hanging Man."

So we have a Hammer. Yosuke Shimizu; in his article “Reading Candlestick Charts” in the book “Breakthroughs in Technical Analysis; New Thinking from the World’s Top Minds” (edited by David Keller), calls this pattern a Takuri shape and states “… they represent an opportune buying signal, especially if they are accompanied by high volume”. Note that Friday’s volume is in the top five since the August bottom.

So what now? I’ll be waiting to see if we can make a bottom. I may trust the Hammer pattern but I want to verify it. Particularly since the GLOBEX has the s&p down 15 points as I type this!

Bottom line: As far as the wave count goes I will quote my last blog entry:”1489 must hold or I am back to the drawing board.” Even more important to the longer-term count is to hold 1479 (the wave I’ high back in August). I remain out of the market.

Weekend Update for November 4, 2007

Even though we had a lower close week over week the cash S&P500 formed an uptrending price bar on the weekly chart higher. As shown in the chart we once again have found support at the confluence of the short (red) and medium (blue) moving averages. A new downward pulse began at this week’s high. Also of interest is that we continue to close at or above the lower of three Gann angles (shown in red on the chart) from the March 2007 low. The support identified in prices by these tools is critical as a failure to hold 1489 would be a bearish development. I expect it will hold.

If our Elliott Wave count is correct than we now have four waves up completed from the August low and have begun the fifth, which is subdividing. This week’s downward price pulse being associated with wave “2 of v”. The Fibonacci and Gann (green lines) targets derived from the weekly chart are shown and are unchanged from last week. Target ranges for wave “v” are 1597-1603, 1624-1627, and 1658-1665. I am also sticking with a guess of November 28 – December 7 for the end of “v”.

Bearish divergence remains in place on the weekly chart between price and all the momentum indicators I follow. This indicator of “trouble bubbling under the surface” was covered in yesterday’s post concerning the monthly chart. The only thing keeping this market up is “time”. In my work time is just not up for this bull.