How Goes the Rally Now?

And so the rally continues; although at this point I am still happy to categorize it as counter-trend. Here is an update on the information I am currently watching:

1) Interplay between price and the indicators. Instead of both indicators, only the composite index (middle pane) is threatening a negative reversal right here. Last time we looked the RSI was higher than it was on August 23 while price was not. This potential negative reversal was never actualized as the RSI never turned down. However, it still is leading price higher. More concerning is that the composite indicator is now higher than it was at the August high. Again, if this oscillator was to turn down from here we would have a bearish negative reversal in place. We’ll have to watch and see if that happens.

2) Price Pulse. It is now clear that the August 28th low marked the end of Beta pulses on both the intermediate and medium-term (see weekly update) levels. As mentioned in the last daily post, Price Pulse theory indicates that a move above the previous Alpha pulse high (1669.51) turns the market bullish on the intermediate level. It will now take a move below the recent August 28th low (1627.47) to turn it back bearish.

3) TD Sell Set-Up. The cash S&P500 is on bar 5. Bar 9, if we were to reach it, would occur this Friday.

Bottom line: While the daily chart remains bearish, Price Pulse Theory indicates that the rally has further upside potential in both price and time. Even if a stronger rally develops here I expect it to fail to make new highs. We would then reverse and go on to make even lower lows.

Weekly Chart for September 8, 2013

The only new development this week is that the recent low might mark the end of the Medium-level Beta pulse. If so, and if our contention that this chart remains bearish is correct, the Delta pulse up should fail to retrace back to the August 2 high.

After failing to retrace back to the high, the next bearish development would be to confirm that the August 2 high also marked the end of the green level Y pulse (and hence wave 5 in the trending impulse pattern from the November 2012 low) by having price fall back below the new Beta pulse low at 1627.47. A close below the Beta-X trendline (shown in blue) would provide further confirmation that the rally from the November 2012 low is complete.

Finally, note that the June 2013 low must still be broken in order to show the TD D-Wave Triple Three count (presented in the recent series of postings on waves) as complete. Please note that the wave count shown on the chart is not that D-Wave count but instead one based heavily on my price pulse work. I use the D-Wave count in a corroborating role.