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.

We've Flipped

After completing a TD Combo countdown last Friday (shown in the chart), the cash S&P500 has produced: bearish divergence between the RSI and Composite Indicator as well as between the Derivative Oscillator and price, a break in the low level Beta-X trendline, and now a price “flip” (close less than the close 4 bars prior). The daily chart is now bearish. The only good news for the bulls was that we held 1681.86 yesterday. This allows for the possibility that another push higher is still possible before the trending impulse pattern from the June 24th low is complete.

The risk, or stop loss, level on the TD Combo signal is 1718.66. I would not be surprised to see that challenged over the next week or so even if we are at an upward exhaustion point.

Weekly Chart Showing Potential Price Exhaustion

Again the focus is on the potential for price exhaustion; especially now that a TD Sequential countdown bar #13 has printed. I use this event in a conservative fashion – waiting for a price flip to trigger a “sell” signal. In this case a close next week below 1680.19 will do the trick. To be balanced we should also point out the associated “stop loss” level of 1737.48. 

The technicals associated with this chart continue to be supportive of potential price exhaustion. Note that even though price is now at its highest closing level, both the RSI (top pane) and Composite Index (not shown) are not confirming. Of course, a continued rally may work off these potential bearish divergences. 

The Elliott Wave count shown is not the TD D-Wave count presented in the recent series of postings. The count shown is based heavily on my price pulse work and you can see two levels of pulses. The bottom line is that we are near the end of a trending impulse pattern from November 2012. Thus we again see potential price exhaustion. Recall that the D-Wave is also indicating pattern completion.

Lastly the Beta-X trendline is shown in blue. This is used as an aggressive “sell” trigger in the price pulse investing scheme. Of equal import is the fact that the rally from the June 2013 low is a Y-pulse which must be followed by a Z-pulse. Oftentimes the most punishing declines are associated with Z pulses. 

With potential exhaustion now showing up at the daily, weekly and monthly levels one should be ready to move to the sidelines nimbly if the sell triggers start to fire.

Price Waves #3 - The 2007 to 2009 Decline

In my last post we reviewed the wave count from the 1974 low using Quarterly Chart data. We wound up with an A-B-C count for the price action between the years 2000 and 2009. That A-B-C pattern is either an Expanded Flat or the first three legs of an Expanding Triangle. The difference being that the third leg (down into the 2009 low) would be a five wave impulse in the Expanded Flat scenario but a three wave corrective pattern in the Expanding Triangle. To distinguish which pattern is forming requires price data on a lower time frame. Since the monthly chart does not resolve the data well enough to answer the question I will take a look at the weekly chart.

The above chart shows a clear Zigzag pattern. We must therefore conclude that it is an Expanding Triangle and NOT an Expanded Flat forming in the fourth wave position from the 2000 high. This implies that the subsequent rally from the 2009 low is wave “D” of the triangle and will itself be a corrective wave pattern. I will start to explore that premise next time and introduce a D-Wave modification.

A Completed Price Pulse on the Daily Time Frame

Although it wasn’t by much, the cash SP500 index slipped below the below the Price Pulse Confirmation Line (horizontal red dashed line at 1623.09) yesterday. This was the second and final step needed to show that the entire move from the April 18th low is a complete Short-Term price pulse/wave. It is a five segment Trending Pattern and is either ALL or PART of the Intermediate Term pulse/wave that also started on April 18th. In wave terminology, the short-term wave is either all of intermediate term wave 5 or just the first part - wave 1 of 5.

Of course the answer to the question – all of five or one of five – is critical to the future course of prices and that is one reason why I wanted to look at the technical status of both the monthly and weekly charts over the last few postings. Their potential weakness leads me to favor the more bearish scenario that the rally from the 2009 low is complete. Currently, the pulses themselves will only confirm that opinion if price were to drop below the April low. For me, as an investor and not a trader, it is time to be very wary of equities.

Elliott Wave - S&P500 Cash Index - 23 Sep 10