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.

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.

Daily RSI Signals Bear Mode

Not much has changed over the past couple of days. I have added the TD Trend Factor target (purple line at 1614.62). Note it is in the SLOT (the 50-78.6% retracement area which I have drawn as a box on today’s chart) with the next larger Beta-X trendline (in orange). A close beneath this line will raise the chances significantly that the trending impulse pattern from last November is complete.

I am also watching for a possible bullish divergence between price and the RSI here. Any such development would mark the end of wave 3 or C from the August 2 high.

Another item of interest from the daily chart:

1) RSI (top pane). We have now had two readings below 38. This lends credence to the view that the August high completed a trending impulse pattern from November 2012 AND that the daily chart is in bear mode.

Bottom Line: The chart is bearish. Let’s see how it develops over the coming days.

A Quick Update of the Daily Chart

A week ago I said “the best I can see for the bulls is a rally that peters out by July 8. I can even see the June 18th high of 1654.19 being broken – but not the May high. This is not a prediction or what I expect but the best case bull scenario I can envision.”

I Just wanted to pop in and let you know that I have no changes to that view. The only thing I want to point out is that Monday’s action not only took us to the 50% retracement line of the entire decline but just about tagged the underside of the Beta-X trendline. Was it a kiss goodbye?

Intermediate Price Pulse and a Trending Pattern

To quickly summarize, my premise is that an Expanding Triangle pattern is forming in the cash SP500 from the 2000 high. Wave 'D' of that pattern is itself a Zigzag pattern from the 2009 low and is about to complete. The Monthly chart showed that Wave 'C' of the Zigzag is a Trending pattern (1-2-3-4-5) where we appear to be towards the end of wave '5'.

On the Weekly chart (below) we can see the Intermediate Term Price Pulses that make up wave '5' of the Monthly chart which began in June 2012. Once again we have the expected five wave Trending pattern of alpha-beta-delta-x-y. Note that pulse 'y' is still forming. In these Trending patterns the Beta-x trendline is the one to watch.

And so .... when pulse 'y' (wave 5) completes on this time frame it will also mark the end of the fifth wave on the Medium time frame, Wave C on the Medium-Long time frame and wave D on the Long time frame. A very deep sell off is then expected to unfold.

Next time I will introduce the daily chart.