A Warning from Level 3

As far as the price pulses go, I have now shown Levels 1, 2, and 4. Today I present the Level 3 pulses along with the Derivative Oscillator (top pane). Hopefully this chart explains clearly why, even though the price pulse patterns are still in bullish mode, I do not feel like chasing the bull here.

Concerning the Level 3 pulses themselves, we are currently doing a Y pulse up. In the current formation from the July bottom the “sell” signal would be a Beta - X trend line break. That line will be at 1033.36 on Monday. Yes, that is still a great distance away but let’s look deeper.

What concerns me here is the action of the Derivative Oscillator. This indicator usually moves smoothly from high to low and it turned down on yesterday’s price action. Furthermore, notice; that from the July low until now the peaks are getting lower and lower just like with the price action from the March low to the June high. As Connie Brown states in her book, Technical Analysis for the Trading Professional, “The market usually breaks down before the market is able to form a fourth oscillator peak.“

Of course we aren’t even positive that a third peak is in. But with other momentum indicators failing and the Elliott Wave count showing a possible Zigzag completing, I think risk of a reversal is too high to be going long now.