Price Pulse Update

On the Friday before the long Memorial Day Weekend the cash S&P500 formed an “inside” day. We have bounced off the 878.45 TD Trend Factor level twice and also failed to move back below the current TD Demand line (now at 879.95). Is the decline from the May 8 high over? Is a retest of that high in the cards or are we going to continue on our way down? To help answer that question I present the latest Price Pulse chart today as the picture is becoming clearer using that methodology.

The current configuration of the BLUE level pulses from the 5/5 low is along the lines shown in Figure 13.14 (Example iii) of Tony Plummer’s book, Forecasting Financial Markets, Technical Analysis and the Dynamics of Price (1990 edition). This is a “multiple top” formation and “… involves the market bouncing away from a particular price level at least twice.” In our case this is the 925-930 area where the Alpha and Delta pulses peaked. Mr. Plummer then writes “Sometimes, a reversal in the Beta-wave may be so slow in developing that the y-wave helps to create a ‘triple top” …” Therefore I think we may still bounce a bit higher in the y-wave now underway from last Thursday’s low but then we will continue the decline in the subsequent Z pulse. I think the May 8 high will wind up being the top of the rally from the March low.

The higher levels of the price pulse support this view. On the GREEN level we have now broken below the Beta – Z trendline drawn across the 3/30 and 5/15 lows. The break of that line is bearish and lets us know that the larger, upward moving RED level Alpha pulse has completed on 5/8. This is the price pulse that aligns with the rally from March. We are now in the larger downward moving RED Beta pulse.

The experimental trade position remains short from 897.34 (5/12); stop & reverse at 930.17. Lower the stop & reverse to 924.61 on a move below 879.61 Tuesday.

A trend-continuation short trade would be taken Tuesday ONLY if the open is less than 879.95. If taken the initial stop would be placed at 896.66. Calculated price objective: 834.79.