A Monthly Chart Update

Today’s chart is a monthly view of the cash S&P500 with a longer term Elliott Wave count. February 2008 produced an “inside” price bar as the market fought to hold the medium term (blue) moving average. This chart remains on the technical “sell” signal from the RSI indicator last described in early January: “The last signal from this indicator was a “sell” that was generated at the end of November 2007 when the market turned down. October 2007 was at a new closing price high but the RSI failed to confirm. This is bearish divergence.”

From the perspective of developing a swing trading system, we do have permission to trade short (since the weekly chart is on a technical “sell” signal as is the Medium term Price Pulse chart). One potential trading vehicle to use is the ProShares SH ETF. When should the purchase of these shares be triggered? I propose that the position be entered when the Intermediate price pulse chart generates a “sell”. This occurred last Friday when the previous B-pulse low was broken. The initial stop loss point should be at 1388.34, the C-pulse high.