Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
Can Stocks Survive Without Stimulus? - 25th Aug 16
Why Putin Might Be on His Way Out - 25th Aug 16
Bond Guru Gary Shilling - The Bond Market Rally of a Lifetime - 25th Aug 16
A Zombie Financial System, Black Swans and a Gold Share Correction - 25th Aug 16
OPEC’s Output Freeze: What Has Changed Since Doha? - 25th Aug 16
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16
Vauxhall Zafira Fires - Second Recall Issued - Inspection Before Bursting into Flames? - 21st Aug 16
Will the Stock Market Bubble Pop Regardless if the FED Never Raises Rates? - 21st Aug 16
US Government Spending - 3 Big Stories Not Being Covered – Part III - 21st Aug 16
Silver Analysis - 20th Aug 16
SPX New Highs, Correction Next? - 20th Aug 16
Housing Bubble - The Marginal Buyer Holds The Pin That Pops Every Asset Bubble - 20th Aug 16
Gold Miners Q2 2016 Fundamentals - 19th Aug 16
Which Price Ratio Matters Most in a Fiat Ponzi? - 19th Aug 16
Big Policies, Bigger Failures - 19th Aug 16
Higher Crude Oil’s Prices and USD/CAD - 19th Aug 16
Here’s Why You Should Look for Dividend Stocks and How - 19th Aug 16
Deglobalization Already Underway — 4 Technologies That Will Speed It Up - 19th Aug 16
These 6 Charts Show Why the Average American Is Fed Up - 18th Aug 16
SPX Easing Lower - 18th Aug 16
Low / Negative Interst Rate’s Legacy - 18th Aug 16
The 45th Anniversary of The Most Destructive Event In Modern Monetary History - 18th Aug 16
USDU - An Important Perspective on the US Dollar - 17th Aug 16
SPX Completes Wave 1 Decline - 17th Aug 16
How to Quickly Spot Common Fibonacci Ratios on a Chart - 17th Aug 16
When Does a Forecast Become a Trade? - 17th Aug 16
Kondratiev Wave - The Financial Winter Is Nearing! - 17th Aug 16
Learn "The 4 Best Elliott Waves to Trade -- and How to Trade Them" - 16th Aug 16
Stock Market Bears Turning Bullish At New All Time Highs - Time to Get Worried? - 15th Aug 16
Job Seekers Sacrificed to the Inflation Gods - 15th Aug 16
A Look At Commodities and Financial Markets Trading Week Ahead - 15th Aug 16
Stock Market New Top Forming? - 15th Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

How to Trade Elliott Waves

Dow Complex Points to Higher Stock Market This Week

Stock-Markets / Stock Markets 2012 Dec 10, 2012 - 03:49 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

The 1424 level of the SPX did what was expected of it: It stopped the counter-trend rally which started at 1343 and caused a reversal of 26 points. Since finding support at 1398, the index has shown resistance to additional selling, and closed the week at 1418, its action suggesting that It may be willing to go beyond the 1424 level before putting an end to the corrective uptrend.

An indication that it may be willing to move higher is the fact that the Dow -- which had halted its rise with a 50% retracement of its decline from the 10/05 high -- closed the week at a new rally high of 13155, ostensibly on its way to the .618 level of 13205 and perhaps even higher.

On the other hand, NDX -- which has been affected by AAPL's weakness - is lagging behind, in spite of the strength in the semiconductors.

Until proven otherwise, the market is still deemed to be in a corrective uptrend, the "B" wave of an intermediate A-B-C pattern. Whenever this rally is over - and after whatever level to which it takes the indices - there should be a continuation of the intermediate correction into the early part of 2013. As of now, the daily indicators are still bullish but, for the first time in the entire rally, they are susceptible to developing negative divergence, which would be an early warning that the rally is about to end. As usual, it will probably show in the breadth indicators first. In fact, for the past 5 days, the A/Ds have given an anemic performance, mostly remaining neutral on an hourly closing basis. If this continues while the market attempts to extend its rally, it will become a red flag.

The general market action shows that it expects an early and favorable resolution of the "fiscal cliff" negotiations. This leaves some room for disappointment if it falls short of expectations, but it would not preclude a final surge when an agreement is reached.

Chart Analysis

Let's look at the daily SPX chart, below which I have added the McClellan oscillator. The blue trend line is an intermediate trend line connecting the October 2011 low with the June low. After breaking through it on the way down, the index rallied and tried twice to get back above it, each time falling back below. It is obvious that it is running into resistance at the broken trend line -- something which is quite common. Now, it is trying one more time. Will it succeed? And by how much? In the process, it has formed a bearish wedge pattern which would allow it to rise once again above the trend line, but if it fails to go past the top wedge line and turns down again, it will probably have completed its counter-trend rally.

The RSI stochastic became overbought on the first rally and still is. It can remain overbought for as long as the uptrend remains in effect, but when it falls below the red line, it will most likely give a sell signal.

The MACD histogram is still very bullish, only showing some mild deceleration. It will have to turn negative before signaling a sell.

The NYMO double-topped just below 60 and pulled back. Unless the next price and breath rally is very strong, it should develop some negative divergence. Its RSI, instead of becoming overbought (which would have been a sign of strength) stopped rising at about 65 and started to pull back, going flat just above 50. Dropping below 50 would be a sign of weakness and a possible sell signal.

As it stands, the index has a decision to make. In order to show that it can move higher, it has to re-gain some upside momentum, and soon. If it has not done so by next week, the odds are good that it will be ready to continue its intermediate correction.

On the hourly chart, we can see better how the blue intermediate trend line has acted as resistance for the past two weeks, which could be the reason why the MACD and especially the A/D (below the chart) are both making such a poor showing. In addition, the hourly stochastic RSI is also overbought.

The wedge pattern gives the SPX another potential move of 15 or twenty points before it comes out on top and modifies the weak pattern for a more bullish one which would have to be interpreted as a resumption of the rally; unless it's a blow-off move which is quickly over.

Cycles

We should be getting close to the point where the cycles bottoming in early 2013 begin to reverse the trend. But cycles can be overridden temporarily by fundamental developments which could be the situation today.

A 3-wk cycle (which may have bottomed over the week-end) could be the reason why the A/D has made such a poor showing over the past week. If so, we could see a resurgence in A/D (and price) strength after Monday.

Breadth

The Summation index (courtesy of StockCharts.com) has rallied but may be starting to curve over before it gets to its moving averages. This is even more apparent in the RSI. That's a sign of deceleration which is no wonder considering the static performance of A/D in the past week.

NYSE Summation Index Chart

Sentiment Indicators

Both short-term and long-term signals of the SentimenTrader (courtesy of same) are staying neutral.

Sentiment Chart

VIX

The 60m charts below (courtesy of Q charts) show VIX compared to SPX. The black asterisk below Friday's close indicates that the two indices are still moving in opposite direction. Normally, this would suggest that the equity index should continue its uptrend. We would need to see relative strength in the VIX before expecting a high in SPX.

The next indicator tells us that the SPX is probably not ready to reverse, just yet.

XLF (Financial SPDR)

This is one leading index which says that SPX will probably go higher before finding a top. It exceeded its Dec. 03 top 3 days ago, while SPX still has not. That would imply that SPX will follow suit in the coming week. There are similar pockets of strength in individual market components which makes it difficult to predict an immediate end to the rally.

BONDS

TLT does not seem to be ready to continue its uptrend. It has pulled back to the low of a 2-week consolidation pattern which coincides with the 200-hr MA. If it cannot hold there over the next few days, it will risk breaking below the bottom green channel line, suggesting that the index has more work to do before attempting to move higher. Worst case scenario would be that it is resuming its corrective trend from the 132 top.

GLD (ETF for gold)

GLD may be getting ready to resume its downtrend. After dropping to its 200-DMA, it bounced a few points during which it back-tested the broken bottom channel line. After pulling back, it made another effort at getting back inside the channel, but failed and quickly dropped back to the level where it previously found support.

It may hold above its moving average a little longer, but with the 25-week cycle pulling it down into the end of December, chances are that it is ready to break its next level of support and perhaps make a measured move equivalent to its first declining phase from the 174 high. If it is a measured move, it should decline to about 157 where it should find some strong support and, at the same time, close a runaway gap that was formed at the beginning of the last uptrend.

UUP (dollar ETF)

UUP has found support about half-way through its former consolidation pattern and rallied to its 21-DMA. That should stop it for the time being and it could continue to build the previous base at a higher level before trying to overcome its 200-DMA once again. Whenever it starts to move up, this should coincide with a top in the equity indices since it and they tend to move in opposite directions.

e

USO (United States Oil Fund)

USO continues to follow the path of least resistance which is down. Last week's action suggests that the consolidation pattern which it made over the past six weeks is about to give way to an extension of its decline from the 37 top. Its readiness to do so can best been observed in the stochastic RSI which has given a strong sell signal. That means that it may also be ready to drop below the internal parallel (light red line) where it had previously found support.

Summary

As anticipated, 1424 did cause a reversal in the SPX. We are about to find out if it's an important reversal, or if it was just a minor set-back leading to higher prices - and by how much! 1430 and 1443 have been mentioned as potential targets if 1424 was exceeded.

The action of the Dow complex at week's end points to higher prices. The industrials and financials rose to new rally highs on Friday, as did the NYSE Composite Index. This should lead to higher prices next week.

The announcement that an agreement has been reached in the "fiscal cliff" negotiations could cause a final surge in wave "B" of the intermediate correction.

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

© 2005-2016 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

Catching a Falling Financial Knife