Rally Caps on -- Bear Market Rally that is!

Wow! You always hear that bear market rallies are short and sharp. Well this is certainly sharp! A powerful uptrending price bar was made on the daily chart of the cash S&P500. We now have the growing possibility that the intermediate term X-pulse low is in.

We still have three more days to go, but at this point the weekly chart is poised to flash a “buy” signal at the end of the week. I was pondering on my thoughts posted yesterday about closing out a trade. One other idea I did not list is to use the time frame right below the intermediate. Just like the time frame above intermediate is used to grant “permission” to trade, perhaps the time frame just below intermediate can be used as a stop mechanism.

In the current instance the latest short term price pulse chart is shown. The stop would have been the “C-Y” trendline which was at 1308.87 yesterday. Using that value as a stop loss one would have gone short (when the Intermediate price pulse chart generated a “sell” on Friday, February 29) at 1327.03 and have been stopped out yesterday at 1308.88. A measly 19 point gain in this instance but at least it is a gain. I will continue to pursue this idea over the coming days by looking at differing time scales.

Here is my bottom line/working hypothesis: A bear market rally to last to about March 24 or so that fails to break the 1388.34 level. We get the weekly technical “buy” signal at the end of this week but it is quickly followed by a RSI “negative reversal” on either March 21 or 28. Then we make new lows for the year.