Failure to Launch

In retrospect, the failure for the C-pulse to move prices away from the A-pulse peak of 1369 was a good warning sign. Yesterday’s downtrending price bar on the daily chart of the cash S&P500 broke below the February 22 B-pulse low; which was the final blow to the bullish case. It is this sort of price action that makes me glad that my “system” takes the higher time frames into account and has me out of equities.

Where does the Intermediate Price Pulse stand now? It has generated a “short-term” sell signal by falling below the B-pulse low. Tony Plummer states that now we have to be careful in that the subsequent Y-pulse rally may abort the signal by retracing back above the B-pulse low point of 1327.04. However, it should not go above the previous A-pulse high of 1369.23 and then a “longer-term” sell would occur on any move below the X-pulse low (yet to be made). And so the Intermediate price pulse picture is negative.

Tomorrow I will look at the next higher-time frames.

If we dip here would you be a short-term buyer?

An uptrending bar was formed on the daily chart of the cash S&P500 yesterday. My primary price pulse interpretation is shown in today’s chart. If the A-pulse is in at the February 13 high (likely but still not confirmed) then the B-pulse low is also in and price is rising in a C-pulse.

Theoretically the C-pulse is the strongest in the entire A-B-C-X-Y-Z cycle and should move prices away from the A-pulse peak of 1369. This idea, and the fact that we are hesitating below the last intermediate peak of 1396.02 should cause the bulls some concern but is certainly not fatal to their case. Concern so soon after getting daily price pulse “buy” permission? Actually, that is the most gut-wrenching aspect of the theory for me -- it urges one to accumulate on weakness so soon after just turning bullish. That is, after “buy” permission was granted on February 25 when the A-peak was exceeded it will now not be negated unless we fall below last Friday’s low of 1327.04. For instance, if yesterday’s high was the C-pulse peak then one would be expected to accumulate on any X-pulse dip here with a stop at 1327.03. The expectation would be that the market will go higher than the C-pulse peak in the subsequent Y-pulse.

Alternate Daily Price Pulse Scenario

Another uptrending price bar formed on the cash S&P500 daily chart yesterday. It still appears as if the A-pulse is in at the February 13 high and the B-pulse low at 1327.04 on the 22nd. The only other scenario is that the A-pulse is not yet complete (see chart). What if this is the case?

If the A-Pulse is not complete it must be doing so now, as any move above 1396.02 (the February 1 high) confirms that the B-pulse is already complete at the February 7 low. In this scenario we are still in a situation where price has broken through the “C-Y” trendline and generated a price pulse “buy” signal. The “goodness” of this signal would depend wholly on the shape of the next A-B-C-X-Y-Z cycle with the C-pulse providing the biggest thrust upwards. Of concern with the potential shape of the next cycle is that the higher level (weekly and monthly) charts are on technical “sell” signals.

Once the A-pulse completes the B-pulse should hold above the 1316.75 level or a new price pulse “sell” will be generated. However; with the daily chart on a technical “buy” one would have to think that that level would hold on a pullback, and so accumulation of shares would occur with the risk point (stop level) at 1316.75.

Again, the scenario discussed today is only the alternate. Tomorrow I will update the primary daily chart scenario according to price pulse theory.

Breakout!?

Yesterday saw a strong uptrending price bar form on the cash S&P500 daily chart. If the A-pulse is in at the February 13 high (likely but not confirmed) then the B-pulse low is now also in and price has broken through both the 1369.23 level and the old “C-Y” trendline. With the daily chart on a technical “buy” one would have to look for the rally to continue here.

I have added some Fibonacci clusters to give a feel for some possible target areas for this bounce. Also added is the long-term moving average (in dark green) which makes the cluster at about 1427 inviting. In this price pulse scenario the current “sell” signal would be a move below last Friday’s low.

What if the A-pulse high is just now being made? I will look at that less likely scenario tomorrow.

A New Price Pulse Sequence Underway

Although the overall market continues to “form a line” (a sideways move) it is now apparent that the Z-pulse concluded at the low of February 7. Moreover; although not definite, it appears that the subsequent A-pulse ended at the February 13 high and failed to break the “C-Y” trendline on the Intermediate price pulse chart. These events are all depicted on today’s chart.

The failure of the A-pulse to break that trendline told us that the retest of the January low can not be confirmed complete. We may still have to go back and test that level. However, the fact that we are now in a new price pulse cycle (A-B-C-X-Y-Z) begins to lessen the value of that ”C-Y” trendline. This is particularly true once the A-pulse is confirmed complete. In the new price pulse cycle the breaking of the A-pulse peak becomes the signal that the previous downward move is complete, not the breaking of the “C-Y” trendline. Thus the new horizontal line drawn on today’s chart at 1369.23; which becomes important once the A-pulse is confirmed complete.

With the daily chart still on a technical “buy” signal (first discussed in my January 24 post) the odds favor that even if the market were to start the week lower in a continuation of the B-pulse, the A-pulse peak will be broken when the market moves up in the C-pulse. If we start higher the question becomes whether the A-pulse completed on February 13 or not and what constitutes a real break of the “C-Y” trendline. In any event, the question is whether to buy the “breakout”; be it of the “C-Y” trendline or the A-pulse peak of 1369.23. At this point in time my system won’t allow it as the weekly chart remains on a technical “sell”.

My current S&P500 roadmap is for the current consolidation to result in an upside breakout which runs into mid-March. At that point I believe the bear market will resume.

Market Continues to Coil ...

Actually; not much has happened to the cash S&P500 during the past week. The latest weekly bar is an “inside” bar and my system still shows the weekly chart on a technical “sell” signal.

We now have two “inside” bars in a row. After the first one the market was in a contracting pattern known as the “Arrow”. This indicated that the market will break out of its consolidation over the next two weeks. Two inside bars is simply called “Double Inside Bars” by Elliott Wave International’s Jeffrey Kennedy and has the same implication as the Arrow only that the break (still continue to beware of false breaks before the actual move occurs) is now imminent!

I will look at the daily chart tomorrow morning to see if it hints which way the break may go.