Where Do The Pulses Stand On Gold?

Today I’ll venture into the precious metals via the World Gold Index and the FoxPulse. At the FoxPulse4 level the chart (above) turned bearish (red arrow) in October 2012 when a break of the Beta-X trendline was accompanied by a bearish divergence between price and the RSI. This chart now needs to close above the 1619.70 level (horizontal cyan line) to turn bullish.

Of course that would require quite the rally from here. Let’s “zoom in” via the lower level pulses. Here is the FoxPulse3 chart starting from that 1619.70 level:

Here we see a different story as the chart turned bullish on August 12th. On this chart we have a reverse head and shoulders pattern. The two Beta pulses being the shoulders and the X pulse between them the head. The Delta-Alpha trendline (in orange) serves as the neckline. We are now watching the Beta-X trendline to warn us of a reversal back to a bearish view.

Now for FoxPulse2.

Here is an example of being whipsawed. A bearish indication was given on September 12th as the Beta-Z trendline was busted. However, the move back above the Alpha pulse on the Fed announcement turned the chart back bullish!

Finally FoxPulse1:

This chart also turned bullish on Fed Day.

In conclusion, we have FoxPulse1, FoxPulse2, and FoxPulse3 bullish. FoxPulse4 and FoxPulse5 (not shown) are bearish. This translates into a 75% bullish position. As both the Level 1 and 2 charts are on new bull signal Alpha Pulses, it is the level 3 chart which would trigger sells on all three levels. That is, a break of the FoxPulse3 Beta-X trendline would immediately make this index a 0% bullish allocation!

A New Beginning - Just The Pulses

Bottom Line: My view has been proved wrong as we have made new highs.

It is time for a change. Why not? The time is ripe to focus solely on what I have been calling Price Pulse Theory. Beginning today it will be called FoxPulse and will be my sole focus. Besides having value in itself, this technique is unique (used only by me) and will allow me to look at other markets besides the equities.

The FoxPulse assigns bullish or bearish ratings to a market across five time frames. FoxPulse1 the shortest, FoxPulse5 the longest. How one uses the ratings is more of a money management issue. For myself, I just use a percentage (of funds available for that market) system. For example I will take a long position as such: 35% based on FoxPulse1; 30% FoxPulse2; 20% FoxPulse3; 10% FoxPulse4; 5% FoxPulse5.

The equity market (as represented by the cash S&P500) is bullish across all five FoxPulses right now. Here is FoxPulse1:

This is a bullish picture. Each upward pulse (Alpha, Delta, Y) in the series (Alpha-Beta-Delta-X-Y-Z) is making higher highs while the downward pulses (Beta, X, Z) are making higher lows. In this situation we want to watch two trendlines. The first, shown in orange, is the early warning line. A close below this level, accompanied by a technical signal, would turn this level bearish. Likewise, a break of the horizontal trend line (in cyan) would turn this level bearish without needing an accompanying technical signal.

Here is FoxPulse2:

On August 6 a bear signal was registered as the Beta-X trendline was broken with a bearish divergence between the RSI and Composite Index. A bull signal followed on September 9 when the peak of the previous Alpha pulse occurred. That bull signal is still in force unless we break below the Beta pulse low of 1681.96. This is the same line as in the FoxPulse1 chart.

Although not shown today the other FoxPulses (3, 4, and 5) are also bullish.

A Countdown 13 Bar Shows Up

After surging higher during the first half of Monday the market drifted lower during the rest of the day. Now the question is … is there more upside to come? New highs? Or was that it?

A bit strange is that a TD Sequential sell countdown completed yesterday. I use the word strange because it has laid dormant for quite a while. The TD Sell Setup that kicked it off registered back on July 9th (see chart). A more recent TD Sell Set-Up just completed (bar 9) last Friday. Precedence goes to the completed countdown because it’s associated setup is larger than the current setup. The associated risk level is at 1718.66 (solid horizontal cyan line). As usual, this is step one of my three step signal process (see posting on the August 31 weekly chart for an example).

Step 2 requires a technical signal. While the RSI (top pane) went to a new high yesterday the Composite Indicator (middle pane) drifted lower. This formation is not quite bearish divergence. Step 3 requires a price flip which has also not yet occurred.

As for the most recent sell setup, the associated risk level is at 1697.98 (horizontal dashed cyan line). It is interesting that we did not close above that level yesterday, ending at 1697.60 on the cash S&P500.

Bottom line: my view that we fail to make new highs, reverse and go on to make lower lows remains intact – but just barely. If yesterday marked an exhaustion event we should see some downside action today.

View About To Be Put To The Test

As I pen this the S&P500 futures are rocketing upward to the tune of 18.8 points. An equivalent move at the cash market open (added to Friday’s closing price) would put us at just below the August high. In other words, today’s action will be quite telling on whether my current narrative is worth its salt. Let’s see what happens.

Price Pulse. It is now clear that the August 28th low marked the end of Beta pulses on both the intermediate and medium-term levels. Particularly with the strong futures this morning it is instructive to recall that the Price Pulse theory indicated that the market had once again turned bullish when the previous Alpha pulse high (1669.51) was broken on September 9th. At this point it would take a move below the August 28th low (1627.47) to turn it bearish.

3) TD Sell Set-Up. The cash S&P500 is on bar 9. The associated risk level is at 1697.98 (horizontal dashed cyan line).

Bottom line: While the daily chart remains bearish under my technical parameters, Price Pulse Theory indicates that the rally has further upside potential in both price and time. However; my position had been that we would fail to make new highs and then reverse and go on to make even lower lows. That interpretation is about to be put to the test.

Weekly Cash SP500 Chart For September 15, 2013

Nothing new to say about this time level. With last week’s rally we can be confident that the recent low marks the end of the Medium-level Beta pulse. If so, and if our contention that this chart remains bearish is correct, the current Delta pulse up should fail to retrace back to the August 2 high.

Emphasis must now be placed on the daily chart.