Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

It's Late September...Where's the Bear?

Stock-Markets / Stock Markets 2010 Sep 18, 2010 - 08:52 AM GMT

By: Steven_Vincent

Stock-Markets

Best Financial Markets Analysis Article(originally published for BullBear Trading Room members on 9/12/10, re-published here with updates)

In the last BullBear Weekend Report on I concluded:

...the likelihood of continued upside in defiance of bearish expectations is high. Whether this represents an intermediate term blip or something more significant is as yet unknown, although there are some long term divergences and indications that point towards a long term bullish conclusion.


We did get that continued updside, though as indicated it was limited by overhead resistance and the exhaustion of the first wave up off the low:

...the short term overbought condition could get even more overbought early this week...Most market observers are already calling for a top and this rally has been greeted with skepticism. In this context I would be looking for a sideways abc formation over the first few days of the week. Traders who are out or looking to add to their long positions could buy the a and c wave lows of wave ii ahead of iii of 3 which should rapidly take the market back to 1131 resistance.

The wave count together with certain technical indicators leads to the conclusion that the first wave is now complete or very nearly so and that we should expect a wave ii pullback this week. Bulls should welcome this as a buying opportunity, particularly fortuitous since most of us likley missed the very rapid rally from the recent low. The ensuing decline should be of sufficient depth and strength to shift sentiment back to solidly bearish in very short order, setting up a powerful iii of 1 of 3 of (3) move back above the downtrend and horizontal resistance.

At this time (Friday, 9/17/10), the market has yet to correct, though it does seem that the stage is set. After grinding lightly higher all week SPX today tapped 1131, the former intraday high, and then faded. It gained 16 pts for the week but most of that came in the Monday morning gap higher and there was little follow through thereafter. There are a number of short and intermediate term technical divergences which suggest a correction is still in order before any further significant advance. Sentiment surveys are showing large numbers of bulls once again and the permabears seem ready to short once again. It's still a trader's market and profit taking is due. And once again, as if on cue, the specter of Sovereign Debt has reared its head in the form of concerns about Ireland. And of course it's late September and with October just around the corner many traders will probably prefer to not take any chances and will play it safe by exiting or holding off on any further buying until after a big sell off.

To sum up the findings of this report: the advance in equities that began near SPX 1040 is most likely the start of a significant bull move, but the first leg of that move is likely at or near its end and will correct soon. Long term, there are a number of developments which auger well for the price of risk assets going forward. We are seeing significant signs of the early stages of a shift from safety back to risk as safe havens such as bonds, Yen and, possibly gold, show signs of topping out. After a brief bout of fear and selling (which bears will misconstrue as the Big Kahuna to the downside), intermediate and long term bullish forces will gain the upper hand and the market will trade higher.

--------------------------------------------------------------------------------

SPX Chart Analysis

Let's have a look at the index comparison chart:

This chart shows that but for the Dow, all of the primary indices are challenging the primary downtrend and most closed the week above resistance. Some have taken out the June high but most have not. It's not uncommon for the first challenge of a major downtrend to fail and together with a wide variety of other technical factors this could stop the advance soon and usher in a substantive pullback.

The bullish scenario shows a reverse head and shoulders pattern in the latter stages of development. Although fairly well formed and evident, this pattern has received little if any attention (which increases its chances for completion). Symmetry with the left shoulder may call for a comparable second dip, perhaps even a double bottom. For now we will assume that, as a bullish pattern, the right shoulder will be stronger and the pullback will be more shallow. The 50% Fib retracement level seems reasonable, but rather than specific levels we will be watching for the completion of a clear three wave abc correction to set up a buying opportunity. Indeed, if the above does represent a bottoming pattern, we can see that bulls have been exceedingly patient in their purchases, waiting for a wave of panic selling to step in and buy in size. These patient, strong hands can be seen at the green arrows.


The short term chart of the move off the August 31 low shows a fairly clear 5 wave bullish impulsive move terminating with an ending diagonal wedge pattern. Although an additional push to 1115-1120 is possible on Monday, there are many technical signs which tend to strongly suggest that this first move may be overbought and exhausted. A clear break of the wedge below 1105 would likely initiate a selling wave. Wave counts on the very short term chart can be somewhat diffucult to peg and there is some risk that the count is wrong and there is still upside in this move. But then again, there are many techincal indications which support the view that this wave is complete (coming up later in the report).

Early action in the US futures and Asia has markets jumping on positive economic news out of China, so should these gains hold markets will likely open in the 1115-1120 zone.

Article Continues here.

Generally these reports as well as twice weekly video reports are prepared for BullBear Trading Service members and then released to the general public on a time delayed basis.  To get immediate access just become a member.  It's easy and currently free of charge.

Disclosure: No current positions.

By Steve Vincent

http://www.thebullbear.com

Steven Vincent has been studying and trading the markets since 1998 and is a member of the Market Technicians Association. He is proprietor of BullBear Trading which provides market analysis, timing and guidance to subscribers. He focuses intermediate to long term swing trading. When he is not charting and analyzing the markets he teaches yoga and meditation in Los Angeles.

© 2010 Copyright Steven Vincent - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in