Weekly Chart Remains Bearish

This chart remains bearish. Here was the three step process that culminated in a bearish rating:

1) A TD Sequential countdown bar #13 on August 2,

2) The cash S&P500 had bearish divergence confirmed between price and the RSI (top pane) on August 9, and

3) A price flip occurred on August 16.

The associated “stop loss” (or risk) level is at 1737.48 (horizontal cyan line).

On this chart, 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). Currently it would take a move below the June 2013 low to get that confirmation. However; an “early warning” signal for this event would be a close below the Beta-X trendline shown in blue.

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.

Presenting The July 2013 Chart

Attached is the new monthly bar chart of the cash SP500 (bottom pane). The top pane contains the Relative Strength Index (RSI) and the middle pane the Composite Indicator. Are there any signs of price exhaustion in this chart?

The RSI began 2009 in the area reserved for bear markets (<38 2013.="" 67="" a="" at="" bull="" but="" composite="" cyclical="" early="" exceeded="" for="" has="" high.="" high="" i="" in="" index="" is="" it="" level="" like="" made="" month="" move.="" new="" not="" now="" rsi="" run="" signaled="" the="" then="" this="" turned="" underway="" up="" was="" well="" when="">potential

bearish divergence. Is there anything more substantial for the bearish case?

Of continued interest is the potential 9-13-9 (labeled in black on the chart) “sell” signal generated by DeMark analysis. I use this signal in a conservative fashion – to me it is not activated until we get a price flip. For that to occur in August we would need an August closing price below 1597.57. However, now that price has closed above the “signal abort” level of 1659.11 (horizontal cyan line), a new high in August will abort that signal.

Another DeMark “Nine” is shown in green at the May 2011 high. The subsequent Sequential countdown reached 13 in May of this year. Again, that is a potential “sell” signal if it is triggered by a price flip this month.

The wave count derived from a DeMark-like analysis (see previous price wave series) has a potential Triple Three pattern ending once we complete the final “C” wave up from the June 2013 low.

Finally, the price pulses. A cyclical bear market rally (from the 2009 low) within a secular bear market decline (from the 2000 high) is often composed of an ALPHA-BETA-DELTA sequence. Both the Medium-Long and Medium sequences show us approaching the end of the Delta pulse. More potential price exhaustion.

Potential. Potential. Potential. The monthly chart is screaming “caution” and this is why, as a long-term investor and not a trader, I remain wary of equities right now. But “caution” is not the same as “sell” and so I can’t definitively say that the monthly chart is screaming “get out now.” But I feel like we are approaching the edge of a cliff.

Price Waves #4 - The Monthly Chart From The 2009 Low

Now let’s look at the cash S&P500 on the monthly chart from an objective wave view:

Starting from the 2009 low of 666.79 (which was a 150 period low) which was identified as the last low on the next higher time frame (Quarterly chart):

1. H greater than 12H: November 2009.

2. L less than 7L: June 2010. This means that W.1 up ended at the 1219.8 high of April 2010.

3. H greater than 20H: November 2010. This means that W.2 down ended at the 1010.91 low of July 2010.

4. L less than 12L: October 2011. This means that W.3 up ended at the 1370.58 high of May 2011.

5. H greater than 33H: February 2012. This means that the W.4 low ended at the 1074.77 low of October 2011.

6. L less than 12L: Not yet recorded. This means that W.5 up is still underway.

Now we note two developments: 1) W.4 overlaps W.1, and 2) W.3 is the shortest when compared to waves 1 and 5. These two developments are perfectly permissible under the TD D-Wave system but NOT under classical Elliott Wave. In order to align the two systems I propose that under such a structure, the TD-Wave labeled W.4 be relabeled as an “x” wave and the waves labeled as W.1; W.2; and W.3 be relabeled as W.A; W.B; and W.C.

The chart shows both the D-Wave (1-2-3-4) and Elliott Wave (A-B-C-X) labels.

Under Elliott Wave theory there exist both Double (A-B-C-X-A-B-C) and Triple Three (A-B-C-X-A-B-C-X-A-B-C) patterns. Going forward, in order to keep the D-wave synched with the Elliott wave, the D-wave 5 must; in Elliott terms, be either an A-B-C or an A-B-C-X-A-B-C pattern. Does it? I’ll continue explore this idea using the weekly chart in my next posting.