Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Strong Stocks Bull Market Continues

Stock-Markets / Stock Markets 2011 Jan 17, 2011 - 01:11 PM GMT

By: Andre_Gratian

Stock-Markets

Best Financial Markets Analysis ArticleVery Long-term trend - The very-long-term cycles are down and if they make their lows when expected, the secular bear market which started in October 2007 should continue until about 2014-2015.

Long-term trend - In March 2009, the SPX began an upward corrective move in the form of a mini bull market. Cycles point to a continuation of this trend into 2011.


SPX: Intermediate trend - Technical observations point to a potential top in late December which will most likely only bring about a short-term correction, but could turn into an intermediate decline.

Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of longer market trends.

Daily market analysis of the short term trend is reserved for subscribers. If you would like to sign up for a FREE 4-week trial period of daily comments, please let me know at ajg@cybertrails.com.

Long-term analysis:

Since March 9, 2009, equity indices have been in a bull market which shows no intention of topping. All trends are up with no sign of an important reversal directly ahead. A potential short-term top in late December brought about only a brief sideways movement which was followed by another minor consolidation in early January. The January consolidation formed a Point & Figure re-accumulation pattern with projections which confirm the 1041 base target to about 1310. We'll look over the projection chart a little later on, but let's start by analyzing the Weekly SPX Chart.

The long-term trend bull market is clearly defined by the green channel which begins when the October 2007 bear market came to an end in March 2009 in conjunction with the 6-year cycle low. The first phase of the up-trend consisted of a long intermediate move (first blue channel) which lasted over a year and consisted of three well-defined up-waves. This was followed by an intermediate correction of only ten weeks which formed a head & shoulder bottom. The index then started on its second intermediate uptrend (second blue channel), which is ongoing and shows no sign of weakening. It fact, if it goes through the top line of the channel, we can say that it is actually accelerating. Because of this evident strength and the lack of intermediate deceleration, it is likely that the next top will turn out to be only a short-term reversal.

The indicators confirm the lack of weakness. The lower indicator is overbought, but that does not mean that it will reverse immediately. Look at what it did the last time it was in that position. It stayed there for three full months before pulling back. Also, the MACD normally gives advance warning by showing some significant negative divergence before prices reverse. At this point, it's still moving up and in the process of making a higher top.

Short-term projections and analysis

The two important aspects of projecting reversals are price and time. Fairly accurate time projections can be made with the help of cycles and Fibonacci ratios. Much more specific price projections come from Point & Figure charting. This technique is only concerned with price and does not take into consideration either time or volume. The following chart substitutes for the P&F chart of the SPX which I keep by hand and am not able to reproduce here.

The blue channel is a blown-up version of the second intermediate channel that you see on the weekly chart. The segment of the SPX which is shown is the second short-term phase of the second intermediate trend. The first one made a top at 1227and this was followed by a four-week correction. During this time, the index made the re-accumulation pattern which is shown on the chart below. On the Point & Figure chart, that pattern gives us several interim projections (which are derived from the various phases within the base) and a total base count is 1312.

It is normal for a consolidation or correction to occur after a valid projection is reached. You can see this clearly on the chart.

All the interim projections, except 1301, have been met by the rising prices. After reaching the 1275 projection, there was a three-day correction which, on the P&F chart, gives us targets which pretty much re-confirm those established at the 1173 base.

The 1287 count was filled, followed by a small consolidation, and then surpassed. The next interim target is 1294. On Friday, the SPX closed on its high of the day at 1193.24, just shy of the projection.

This is probably sufficient to end the phase which started at 1262. As you will see on the next chart, the hourly indicators are screaming "sell'! Considering the strength of the advance and the fact that the SPX has not yet reached its ultimate projection of 1310-1312, the most likely scenario that follows will be only another near-term consolidation in preparation for a move to the final destination.

Before we move on to the hourly chart, I want to make a couple more observations about the present one. The blue short-term channel is divided into two spheres. The index is currently trading near the top of the entire channel. This is a sign of strength. In order to put an end to the short-term trend, the SPX would have to have more than a hundred-point decline. Before this can happen, the index would probably have to manufacture some sort of distribution pattern which carries this potential. Until this happens, it is unlikely that even the short-term trend will be threatened - even less, the intermediate one!

The green trend line is the trend line of the short-term advance from 1273. Breaking this trend line would be the first sign that we may be ready for a short-term correction.

Let's now look at the Hourly Chart.

Here, you see the same blue channel and its median, and the green short-term trend line discussed in the previous chart. In addition, because of the market strength, it is possible to draw another "channel within the channel', and this one is outlined in purple. Note how the index found support at the 1262 level in conjunction with this channel's lower trend line.

Let's now focus on the last small uptrend segment which started at 1262. It only made a small consolidation at 1288, and then moved beyond and has essentially reached the next target of 1294.

The whole move consisted of 5 waves which, as we know, normally brings about a correction when complete.

If reaching a projection in a 5-wave pattern were not enough to suggest a top, look at the indicators. The top one is reaching an overbought condition for the second time in the same uptrend, and there is negative divergence in all three indicators with the lowest one being by far the worst.

EW analysts see this as the end of the move which started at 1273. They may be right, but that would mean that the SPX would have to forego its projection to 1310-12. This is certainly possible, but the market will have to show me that this is what it has in mind. For a significant reversal to take place which would threaten the short-term uptrend, the index would have to retrace below the 1262 level, break below the green short-trend line, and move below the 200-hr MA. This would then have to be followed by an eventual break of the lower blue channel trend line which is currently over 100 points lower. That's a pretty tall order for a market which is displaying so much strength.

Cycles

The only conventional cycle scheduled to bottom in the near future is a 60 calendar day cycle due in the last week of January. The next 17-wk cycle is not due until mid-February.

It is always possible that Fibonacci CITs can influence prices.

Breadth

I have kept the NYSE Summation Index (courtesy of StockCharts.com) of two weeks ago to show the small amount of change which has taken place in this index. The RSI has crept a little higher, but has not yet reversed. The poor showing of the former index did not prevent the SPX from making a new high. One could say that the picture has worsened, but until there is an actual reversal of the trend, no sell signal is given.

Sentiment

The SentimenTrader (courtesy of same) long-term index remains only moderately negative with little change from two weeks ago. The short-term index is slightly more negative, but the long-term has, if anything, grown a tad more positive. This is perhaps another reason not to expect a significant top to develop at this level.

Two weeks ago, I showed a chart of the NDX/SPX relative strength. At the time, it had started a downtrend but since then has had a substantial rally.

The VIX

This is a monthly chart of the VIX for the last bull/bear market phases starting in 2002. It shows that the VIX dropped to about 10 and had a long basing period, turning up nearly a year before the next market top. We can't expect an exact replica of this behavior, but this past history tells us that we can probably expect a basing period of some sort, followed by a significant rise in this index before the bull market top is in place.

Dollar index

For now, the dollar and equity indices have an inverse relationship. The dollar has been in a corrective or base-building mode since late November after making what appears to be a significant low earlier that month. When that base and correction is over, it could be followed by an important uptrend, and this would probably have a negative effect on the SPX.

The charts below show the daily dollar ETF (UUP) on the left, and the hourly one on the right. The daily indicators are still declining, suggesting that more work -- and perhaps a lower short-term low - may be needed before the index completes its consolidation. The hourly chart is a little more bullish, perhaps indicating that a short-term bounce is near.

The P&F chart pattern could be interpreted as a base under construction. It will require more time to clarify itself.

Gold

Below is a daily chart of the gold ETF, GLD. Ever since it reached its Point & Figure projection of 139, gold has been consolidating in a six-point range. Now, the consolidation pattern appears to be evolving into a corrective one. The first support level at 133 is being challenged and has already been violated. Considering the condition of the indicators, it is likely that the ETF is ready to move lower and to challenge the more important 130 level.

The lower indicator has shown negative divergence ever since the first 139 top was made. It is still dropping, suggesting that a low is not yet in place.

The MACD paints a picture of even greater weakness. It is entering its third month of steady decline, making a pattern of lower highs and lower lows, and it has just gone negative.

A conservative assessment of the P&F distribution pattern gives us a minimum projection to 128 for the first phase. The next phase would take the price down to 121, and if the entire top is considered, a maximum projection of 110 is possible. Another way to count would yield 123 and 116 as the most likely retracements. It is also possible that the distribution pattern is not complete. We will re-visit the topping action over the next few weeks.

Summary

The SPX, as a representative for the equity indices, is in a strong bull market which started in March 2009 and shows no sign of coming to an end.

The intermediate phase which began in early September 2010 is also very strong with no indication of topping.

Within the intermediate phase, the short-term trend which originated in late December 2010 has been given a Point & Figure projection of about 1310 before it reverses. On Friday, the index essentially reached an interim projection of 1294, and hourly indicators are signaling that a near-term reversal is imminent.

It is possible that this level will turn out to be the end of the short-term phase but, considering the underlying strength of the market, a full extent of the move to 1310 cannot be discounted.

FREE TRIAL SUBSCRIPTON

If precision in market timing for all time frames is something which is important to you, you should consider a trial subscription to my service. It is free, and you will have four weeks to evaluate its worth.

For a FREE 4-week trial.  Send an email to:  ajg@cybertrails.com

For further subscription options, payment plans, and for important general information, I encourage you to visit my website at www.marketurningpoints.com. It contains summaries of my background, my investment and trading strategies and my unique method of intra-day communication with Market Turning Points subscribers.

By Andre Gratian
MarketTurningPoints.com

A market advisory service should be evaluated on the basis of its forecasting accuracy and cost. At $25.00 per month, this service is probably the best all-around value. Two areas of analysis that are unmatched anywhere else -- cycles (from 2.5-wk to 18-years and longer) and accurate, coordinated Point & Figure and Fibonacci projections -- are combined with other methodologies to bring you weekly reports and frequent daily updates.

“By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint.” -- Mark Twain

You may also want to visit the Market Turning Points website to familiarize yourself with my philosophy and strategy.www.marketurningpoints.com

Disclaimer - The above comments about the financial markets are based purely on what I consider to be sound technical analysis principles uncompromised by fundamental considerations. They represent my own opinion and are not meant to be construed as trading or investment advice, but are offered as an analytical point of view which might be of interest to those who follow stock market cycles and technical analysis.

Andre Gratian Archive

© 2005-2019 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