More Price Pulse Stuff

After a very negative day on Wednesday we turned right around and had a very strong Thursday, which was a downtrending price bar with a higher close.

Today’s chart shows what I call the “medium term” price pulse. Previously I showed the short and intermediate term view. The medium time frame shows one complete pulse (made up of the six pulses A-B-C-X-Y-Z) from August 2007 low to the recent January 2008 low. Note that in between was the all-time record high of October 2007 which was the end of the “A” pulse.

This is what Tony Plummer has to say about this formation: “A short-term sell signal is triggered as the x-wave falls below the bottom of the B-wave. However, the subsequent y-wave rally may abort the signal by rallying back above it; …” and “A longer-term (or regenerated) sell signal is given when the z-wave penetrates below the bottom of the x-wave.”

We are now in the next price pulse cycle on this time frame with the A-pulse now developing. The first price pulse “buy” signal can only come when the C-pulse rises above the A-pulse peak after a retest of the recent Z-pulse bottom by the B-pulse. This is just more emphasis on my position that a retest of the January 23 low is still required.

Still Looking for a Retest

After all of the hype and excitement the cash S&P500 index ended up close to where it was before the Fed announcement: down. The daily chart made an uptrending bar with a lower close on Tuesday. Not only that, it was a “Key Reversal Day” and the volume was higher.

We also had a technical warning as a negative reversal was formed between price and the RSI. Although the RSI is now higher than it was on January 14 the price is not. The minimum price projection from the setup is 1256.55. Indeed it still looks like a retest of the January 23 low is ahead.

Waiting on the FED (Again)

The cash S&P500 daily chart made an uptrending bar with a higher close on Tuesday. As the high was still below last Friday’s high it is clear that we are marking time until the Fed announces. Not only are we right at the short term moving average (see chart) but volume fell yet again. Bottom Line: I am still waiting for a retest of the January 23 low.

Volume and Price

Yesterday the daily bar on the cash S&P500 daily chart can be classified as downtrending with a higher close. I am still waiting for a retest of the January 23 low.

Today’s chart shows volume (top pane) along with the price action. The January 23 low and sharp reversal came on very heavy volume which confirmed the “capitulation” aspect of that day. Troublesome for the bulls has been the declining volume accompanying the rally since that date. Increasing price with decreasing volume is a bearish relationship.

More Price Pulses

Last Thursday I began to explore my interpretation of Price pulses based on the excellent book by Tony Plummer entitled “Forecasting Financial Markets – Technical Analysis and the Dynamics of Price”. In that post I looked at what I call the “short” time scale and began to build trading rules. As of last Thursday we had just seen an x-pulse bottom on January 23 with the price pulse pattern warning us to wait for a re-test of that low.

Price Pulses can be found on different time scales. What I call the “Intermediate” scale is just above the “short” scale and is shown in today’s chart. The first item of note is the symmetry in the moves from October 11 to November 26 and December 11 to January 23. Each began at Y-pulse highs and then had an orderly downtrend of five pulses; each pulse in succession showing a lower high and then a lower low.

Now we find the market at perhaps another Y-pulse high. If this is the case it will be of great interest to see whether the re-test of last Wednesday’s low can hold. Even if it doesn’t, the key will be future developments against the C-Y trendline (shown on the chart).

And so both the short and intermediate price pulse charts are pointing to the next event to watch for: the retest of the January 23 low.

Weekly Update January 27

Although we were up a bit over 5 points for the week the price bar of the cash S&P500 was again downtrending on the weekly price chart. It is interesting that we made low this week at 1270.5:

Low price in October 2002: 768.63.
High price in October 2007: 1576.09.

1576.09 – (.382 X (1576.09 – 768.63) = 1267.64.

720 degrees (2 turns of the circle) down on the Gann wheel from 1576 = 1274.5

We also had a technical buy signal on the daily chart after the market hit the low this week and we counted a complete a-b-c Flat pattern as well. If the 1270 level was a significant low where does it fit in the bigger picture? Today’s chart shows a weekly chart with my Elliott count on it. Note that the recent a-b-c flat is at the Fibonacci grid line marked 500%. The decline from October 2007 is a Fibonacci five times the a-b-c expanded flat that formed from March to October 2005. That was a 32 week (158 TD) pattern. From October 2007 to now has been 15 weeks (74 TD); close enough to 50% in my work to qualify as a price/time match.

These calculations show that the current decline “could” be a complete wave (4) in the sequence from the 2002 low; but I don’t think so. For one thing we have not received a technical buy signal on the weekly chart confirming the completion of a wave pattern. I think it more likely that the recent a-b-c Flat from October is just the first part of a larger corrective pattern.

Tomorrow I will continue my study of Price Pulse theory.