Z-Pulse confirmed as underway

Although it closed higher, the daily bar on the chart of the cash S&P500 can be classified as “downtrending”. Note on today’s chart that the bounce yesterday again came from a Fibonacci level identified by previous price pulse swings. During the trading session we violated the 1322.26 level which confirmed that the Y-pulse high of February 1 is in. This means that the Z-pulse is in fact underway and in the process of testing the January 23 low.

Now I want to see if the weekly chart can generate a technical “buy” signal. For us to get in a position to do that this week we would need the S&P to close below 1325.19 today.

No new info

The cash S&P500 formed another downtrending day on Wednesday. This means that the February 1 high was both a price fractal and a high. Other than that the day did not reveal any new information. I continue to watch for the items mentioned yesterday.

It Looks Like the Retest has Begun

The cash S&P500 formed a downtrending day on Tuesday and it appears as though the retest of the January 23 low has begun. Please note that the retest does not have to be done in one fell swoop. There can be bounces on the way down.

There are a number of things I will be watching as the retest unfolds. Most importantly will be the weekly chart. Will it give a technical “buy” signal on the retest? This question is even more important to me then whether or not we get a new low. My developing trading system will only allow a long trade to be established under a weekly “buy” signal.

On a shorter-term basis the first thing I want to see is whether we can break below the January 28 low of 1322.26. That is the first level needed at this point to confirm that the Y-pulse high is in on the “intermediate” time frame.

On today’s chart I have entered the Fibonacci price levels to watch from three different time frames of the price pulse. Interestingly we closed right at the first cluster around the 1335 level. The next cluster is just below 1300 and then again at the January 23 low.

Fibonacci and Price Pulses

The cash S&P500 formed an inside day on Monday. On the “intermediate” time frame I am still waiting for the Y-pulse high to come in before the retest of the January 23 lows occurs with the subsequent Z-pulse.

Notice on this chart that I watch Fibonacci price ratios between the price pulses (like you would do with Elliott Waves). If Friday’s high were the end of the Y-pulse it would be a Fibonacci ratio of the previous X-pulse.

Weekly Update

One of the objectives of this blog is to develop a unique swing trading system. One of the primary rules to date is to “trade only in the direction of the trend”; which I define as the technical signals in effect on the immediately higher time frame(s). Therefore, even though the daily chart of the cash S&P500 went on a “buy” signal at the close on January 23, here is what I wrote on the 24th:

“Technically the daily chart flashed a “buy” signal at the close when the composite index turned up failing to confirm the RSI’s new low. In my developing trading system I can’t go long here since the immediately higher time frame (weekly) is still on a “sell” signal as described in my posting of January 6.”

As of today, even with an uptrending price bar on the new chart, the weekly chart remains on a “sell”. I have been expecting prices to “retest” the January 23 lows. As the bounce from that point continues a fair question to ask is “How high will we go before the retest occurs?” My favorite way to answer is to spot resistance areas where moving averages merge with Fibonacci retracement ratios.

Today’s chart shows the weekly with two moving averages heading to meet the 50% retracement line at about 1424.