Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Stock Market S&P 1424 Inflection Point

Stock-Markets / Stock Markets 2012 Dec 03, 2012 - 10:54 AM GMT

By: Andre_Gratian

Stock-Markets

Current position of the market

 

SPX: Very Long-term trend – The very-long-term cycles are down and, if they make their lows when expected (after this bull market is over) there will be another steep and prolonged decline into late 2014.  It is probable, however, that the steep correction of 2007-2009 will have curtailed the full downward pressure potential of the 120-yr cycle.

 

SPX: Intermediate trend –  SPX has made a top at 1474.  A mid-correction rally is underway. 


 

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

 

 

Market Overview

 

Looking at things too closely hampers one’s overall perspective and can lead to confusion.  This is true with the stock market and this is why what happens on a day-to-day basis makes much more sense if one has a good idea of what the market is doing over the longer-term. 

 

We are currently in a bull market which started in March 2009 and which has given no indication of having ended.  When the SPX reached 1474, it started an intermediate-term consolidation which is ongoing and will probably not end until early 2013.  To put it in graphic terms, from 1474, SPX declined to 1343, most likely completing the “A” wave of an A-B-C correction.  That puts us in a “B” wave counter-trend rally which has not yet ended.  When it does, we should start the next decline into early 2013.  So where are we in this “B” wave?

 

There are several possibilities.  The first is that the rally has already ended at 1419.  There was a P&F phase projection to that level which, obviously, has some merit because since touching 1419 early on Thursday morning, the index has consolidated and traded in a narrow range.  At this time, the market condition is neutral and does not show much weakness.  This suggests that we should soon rally to our next phase projection of 1424, perhaps even extending the move beyond. 

 

1424 is not only a P&F projection, but it is also the level at which SPX would complete a .618 retracement of the decline from 1474.  From that standpoint, 1424/1429 would be a logical level at which to end the “B” wave, but… with congress currently trying to find a way of avoiding going over the “fiscal cliff”, if an agreement is reached between the two parties over the near-term, the SPX has the potential to surge to about 1445 and perhaps even to 1464 on the news.  Based on cycles, if there is no resolution over the next week, wave “C” could begin its descent into early next year. 

 

With this perspective in mind, we can monitor the market’s activity over the near term and see which course it decides to take. 

 

 

Chart Analysis

 

The daily chart of the SPX -- to which I have added the NYMO -- is very revealing in many respects.   First, if our hypothesis that this is a “B” wave is correct, it would not be unusual for it to come out of the initial down channel before coming to an end.  The downside pressure was sharp but brief and prices quickly got back above the 200-DMA, and even above the intermediate trend line, which eliminates the possibility that this is only a back-test of the broken trend line.  The rally has now essentially reached the 50-DMA and if it goes through it, it would be a sign of continued strength;  especially since the MA, combined with a .618 retracement to 1424 and a P&F count to that level could offer significant resistance and put an end to the rally. 

 

 

Not readily seen on the bar chart, but very prominent on the P&F chart is the fact that during the past two days of trading, a ledge has formed which is already 22 points across.  The action of the index over the next few days will tell us if this is accumulation or distribution.  If we touch 1424 and pull back below 1400, it will be an indication that the move is most likely over, but we could also touch 1424 and continue to consolidate before moving higher. 

 

The two indicators at the bottom of the chart developed plenty of momentum during the rally and are strongly positive, but overbought.  However, they do not show any negative divergence, and this could indicate that the move will not be over until they do. More impressive yet is the NYMO which has reached the level where it was at the 1474 top, and is matching price momentum oscillator tick for tick.  When we get close to the end of a rally, negative divergence tends to first show up in the NYMO.  In this case, its MACD histogram is not even showing deceleration.  Until we have some clear signs that a top is in the making, it is best to be ready for higher prices.  Anyway, as long as SPX holds above the green trend line, the uptrend should be safe. 

 

The SPX hourly chart gives us a better view of the market’s recent action.  The cycles which were supposed to pull the index down into the end of the month reversed early – and quickly!  It was a two-day affair with the second day a 14-point decline that changed course instantly, with buyers anxious to get in ahead of the 3rd qtr. GDP’s strong upside revision the next day.  That move carried back above the blue intermediate trend line and went through the 200-hr MA that had stopped the previous rally.  There was also little retracement in spite of hitting fairly strong overhead resistance.  These are all signs of strength and if we can get past 1424, there is a good chance we’ll get past the 1434 level as well, opening the way for 1445 and perhaps even 1464.   

 

Cycles

 

The pull-back into the end of the month was brief and shallow. 

 

An intervening high could show up in the next few days and bring an end to the “B” wave rally. 

 

The intermediate low is still expected to be in early 2013. 

 

Breadth

 

The Summation index (courtesy of StockCharts.com) is back in an uptrend and shows no sign of reversing. The RSI has only reached the half-way point of its range, so it has plenty of room to move higher, even if it only gets to a mild overbought level.  This would imply more strength in the market over the next few days.  Conversely, the inability to move much above the 50% line would be a sign of weakness.

 

 

 

Sentiment Indicators

 

Both short-term and long-term signals of the SentimenTrader (courtesy of same) have moved back to neutral.

 

 

VIX

 

VIX is giving a warning that we could be at or near a short-term top in the SPX.  It has failed to make a new low since 11/21 while, during that time, SPX has moved up about 30 points.  This is the kind of condition that alerts us to a potential reversal.

 

 

XLF (Financial SPDR)

 

The warning being issued by VIX is duplicated in the XLF.  The same condition described in the VIX essentially exists in the XLF.  It made a high on the 23rd and has refused to go higher since, while the SPX has tacked on another 11 points.  Can both of these leading indicators which have a good record of pin-pointing reversals be mis-leading us this time!

 

Their warnings appear to be at odds with the strength which is still apparent in the indices.  The next week’s action should clarify the market’s intention.

 

BONDS

 

TLT continues to consolidate in a downtrend … or in an uptrend, take your choice!  The latter seems to be more logical since it tends to go against the market and we are expecting a low in early 2013.  This could lead to a test of the high and even perhaps to a new high.  The index has an unfilled potential to 137, but reaching it will become less and less possible if it does not do it by the time the market concludes its intermediate correction.

 

 

 

GLD (ETF for gold) 

 

There is no change in the prognosis for GLD.  Its sudden drop from 169 to 166 suggests that it has most likely achieved its near-term potential on the upside. 

 

It could be making a pattern which is very similar to that of the market.  Because it is expected to continue its correction into the 25-week cycle low bottoming at the end of December, it too is in an A-B-C correction and may already have begun the “C” wave.  It has strong support starting at 156, but could continue down to about 152 before making a low.  160-162 is the minimum expectation for the end of wave “C”.

 

UUP (dollar ETF)

 

UUP has found support at the previous near-term highs and could hold at this level before continuing its uptrend.  Some additional consolidation is probable, perhaps in a sideways pattern.  If it cannot hold this level, there is a potential projection down to 21.30 which looks unlikely to be realized at this time, but should be kept in mind.

USO (United States Oil Fund)

 

Investors are still showing little interest in USO.  The index continues to trade in a sideways pattern and has hardly participated in the current market rally.  This could be telling us something important.

 

First of all, it is obvious that over the long term, USO is increasing its relative weakness to the SPX.   

When SPX made a new high in March 2012, USO peaked well below its May 2011 high.  Again, in September SPX made another new high, but USO traded nowhere near its March 2012 high. The

intermediate lows show the same negative patterns.  USO made a slightly new low in June 2012 while SPX remained substantially above its October 2011 low.  And there is no sign that this trend is being reversed as USO continues to show relative weakness in its current decline. 

 

The P&F chart projects that USO should drop to a new low of 29 by the time the intermediate correction in the market comes to an end, and this makes USO valuable as a confirming indicator.  You will notice that since May 2011, USO has participated in every intermediate trend, and is still doing so today.  Now look at the pattern that USO has made since SPX re-bounded from 1343.  Does it look as if it has started an intermediate uptrend?  No it does not, and if we take the projection at face value, it won’t do so until it reaches 29. 

 

This is a strong indication that SPX did not conclude its intermediate correction at 1343 but that it is only experiencing a counter-trend rally.  Its correction low will most likely come when USO meets its 29 target.  Cycle-wise, that will probably be in January/February 2013. 

 

Summary

 

“The anticipated mid-point rally within an intermediate downtrend took hold at SPX 1343, producing a strong rebound which has already retraced 50% of the decline from 1474.” 

 

That was the situation a week ago.  Now, it looks as if SPX will retrace at least .618 of its decline from 1474.  That would bring it to 1424 which also happens to be a P&F projection, and would put it in the vicinity of the 50-DMA.  That could make 1424 an important inflection point.

 

Andre

FREE TRIAL SUBSCRIPTON

 

If precision in market timing for all time framesis something that you find important, you should

Consider taking a trial subscription to my service.  It is free, and you will have four weeks to evaluate its worth.  It embodies many years of research with the eventual goal of understanding as perfectly as possible how the market functions.  I believe that I have achieved this goal. 

 

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

subscribers. I have also started an archive of former newsletters so that you can not only evaluate past performance, but also be aware of the increasing accuracy of forecasts.

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

© 2005-2018 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

6 Critical Money Making Rules