Still no "Buy" Signal on the Weekly Chart

Although it was a topsy-turvy week when viewed day-by-day, when the dust settled the latest price bar on the cash S&P500 weekly chart was once again downtrending. Even though we haven’t yet dipped below the January low we are at another new closing low. Thus; even though last week’s chart showed “potential” for a technical “buy” signal, we still don’t have one. The potential is still there but we still need to see both price and the RSI indicator turn up with bullish divergence in place. It is something I just have to continue to monitor.

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.

Musings on the Developing Trading System

We began the week with another downtrending price bar on the daily chart of the cash S&P500. Let’s review the trading system built to date.

1) Only take trades when granted permission by the next higher time frame. Currently the weekly chart is on a technical “sell” signal (as is the Medium term Price Pulse char) and so we can only go short the daily chart. One potential trading vehicle to use is the ProShares SH ETF.

2) 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 on Friday, February 29 when the previous B-pulse low was broken at 1327.03. The initial stop loss point should be at 1388.34, the C-pulse high.

The next question that needs to be addressed is “When is the position closed?” I think there are three instances. One is when the stop loss is triggered and another is if the weekly chart flashes a technical “buy” signal. The third would be if the Intermediate price pulse chart generates a “buy”. None of these three instances exist this morning and so the system remains on the short trade.