Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Stock Market C Wave Decline Probably Ahead

Stock-Markets / Stock Markets 2012 Dec 17, 2012 - 05:32 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 in the form of A-B-C.  It is likely that wave B completed at 1439. 


 

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

 

“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.”

 

Summary:  1430 and 1443 have been mentioned as potential targets if 1424 was exceeded.”

 

Last Wednesday, SPX rallied to 1438.59 then started to decline.  The decline lasted into Friday, by which time the index had lost 27 points. 

 

The Dow Industrials -- which was the first to extend the rally-- also made a new high at 13329 before reversing, but the NDX could only re-test its high of 12/03 and, on Friday, briefly broke below its 12/06 low, but closed above at the end of the day. 

 

My view of the market position is that, since 1474, the SPX has been in an intermediate corrective wave with 1343 being the half-way point, or the completion of the “A” wave.  There is now a good chance that Wednesday’s high represents the top of “B”, and that “C” is now underway.  If that’s the case, and “C” is of the same length as “A”, the total correction should be complete by mid-January.  In fact, this is about the time that the 66-wk cycle is expected to make its low. 

The only thing that could change that scenario is if wave “B” is still not complete.  In spite of the 27-point drop, SPX still has not given a confirmed sell signal.  There is a good chance that NDX has, but may not be ready to continue its decline right away, and DJIA, being the strongest of the three indices, is even less likely to be susceptible to much more immediate weakness. 

 

Further selling next week could trigger a confirmed sell signal, but if none develops, a test of the high should occur.

 

Let’s look at the charts. 

 

Chart Analysis

 

Since I mentioned that the Dow was the strongest of the three indices, let’s start by looking at its daily chart, below which I have positioned the McClellan oscillator. 

 

 

Since the mid-November low, the Dow has been in a steep uptrend but, on Friday, slightly violated its trend line.  However, if we frame the up-move with channel lines, we see that it is still trading in the upper half of that channel.  Until prices show more weakness, we cannot say conclusively that  the uptrend is over. 

 

This analysis is reinforced by the various indicators.  On the price chart itself, the index is still well above its 200 DMA as well as the 21 DMA.  At the bottom of the chart, the SRSI and the CCI have both turned down, but are still positive. 

 

The NYMO is a little more negative, having made a H&S pattern, but it is essentially still neutral.  All told, we will need to see more weakness before we conclude that the DJIA has given a confirmed sell signal which would represent the beginning of the “C” wave. 

 

 

The Russell 2000 often takes the role of a leading indicator, and it has not given a confirmed sell signal either.  Its pattern is very similar to that of the Dow but a trifle weaker.  It, too, is sitting above some good support which helped it remain above the previous day’s low on Friday.

 

The indicators are also similar.  As in the DOW, the Russell price index remains well above its 200 DMA and 21 DMA.  And at the bottom of the chart, although they have turned down, the indicators also remain positive.   

 

Both charts suggest that the market may not be quite ready to reverse its positive short-term trend;  at least not without having a test of the recent highs. 

 

When we look at the 60m chart of the SPX we notice the same patterns of support, deceleration and divergence that exist in the daily charts above, but they are more visible. 

 

 

On Friday, the index came to rest on the mid-channel line and, even if it were to break it, it would immediately find good support on the blue horizontal line which represents a level where declines have been arrested before.  Note also that it is still trading above its 200-hr MA. 

 

The deceleration is evident in the price, but it is even more so in the indicators as positive divergence.  The hourly MACD of the A/D also shows positive divergence and its histogram remained positive until the end of Friday’s session. 

 

On the Point & Figure chart, the top formation has made a distribution pattern which has a good phase projection to about 1410.  Considering the indicator patterns of the hourly chart, that level may stop the decline for a while, and perhaps produce some sort of rebound. 

 

 

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.”

 

Even if we do not yet have a confirmed reversal, the downward pressure of the 66-wk cycle has probably started and should continue (with some minor interruptions) into its early 2013 low.

 

Breadth

 

The Summation Index (courtesy of StockCharts.com) has continued to rise,  touching its 200 DMA on Friday.  The RSI had a slight downtick, but the MACD is still rising and its lines have not made a bearish cross, keeping the histogram positive.  Were these indicators already in an established downtrend, we could expect the market decline to continue, but since no real weakness is yet showing, we cannot say with certainty that the market has reversed.

 

 

Sentiment Indicators

 

The short-term signal of the SentimenTrader (courtesy of same) has come dead center and could not be more neutral.  This could mean that the decline has a little more to go over the near-term.  The longer term index is just beginning to enter the pessimistic zone.  It will undoubtedly be much lower by the time that the 66-wk cycle has made its low, putting an end to the intermediate correction.  

 

 

VIX

 

This week we look at the VIX by itself with a 4-hr chart, and this gives us just the perspective we need.  Last week, we saw that VIX was predicting a near-term reaction in SPX – and it was right.  This week it is in sync with SPX, rising while the latter is falling.  But it is not yet predicting a severe downtrend.  To do that, it will have to rise above 17.50 -- which it will probably do eventually-- but for now, it is likely that 17.50 will cause a minor pull-back in the index.  This is supported by the P&F chart which suggest similar action, intimating that the market will rebound before going much lower. 

 

 

XLF (Financial SPDR)

 

“This is one leading index which says that SPX will probably go higher before finding a top.

 

As I have often mentioned XLF, like VIX, is of great value as a leading indicator.  On this hourly chart, we can see that XLF has a chart pattern in the form of a wedge, similar to that of the Dow but, unlike the Dow, on Friday the decline stopped on its uptrend line while the Dow went slightly through.  That makes it stronger than the Dow, and much stronger than either the SPX or the NDX, and it is probably telling us to expect some sort of rebound. 

 

Its indicators are saying the same thing with an oversold SRSI and some positive divergence in the CCI.

 

 

BONDS

 

TLT matched the decline in the indices with a decline of its own, which is not that unusual but is a sign of weakness and, if the indices are ready to rebound, it’s likely that it will decline some more. 

 

It appears to be finding support on the top (red) channel line (for the third time now).  If it should hold that line as the indices rally, the technical damage will not be too severe and it will still be able to extend its interrupted uptrend a little higher.  However, and although this may be a little premature, the best that can be expected is that it will have a re-test of its 132 top.  The odds of its making a new high to 137 are diminishing rapidly.

 

GLD (ETF for gold) 

 

GLD found support on its 200 DMA the first time that it touched it.  I may not be so lucky over the next few days.  That will depend, to some extent, on the strength of the rebound experienced by the indices. 

 

 

Beyond that, it will probably not be too long before GLD succumbs to the downward pull of its 25-wk cycle which is due to make its low in late December.  By then, it could drop to the next support level shown on the chart.  This would coincide with the standing P&F projection down to 157-159. 

 

UUP (dollar ETF)

 

Strength in the Euro is having an adverse effect on the dollar.  After failing to continue its uptrend beyond the 200 DMA, UUP has pulled back and is challenging its recent support once again.  There is no clear P&F projection for the low but, considering that the trend appears to be accelerating on the downside, we will need to see some better price action before the index is ready to resume its uptrend.  The most logical point for the downtrend to stop would be at the bottom of the grey channel.  If it does, it would complete an a-b-c correction, preparing UUP for a resumption of its uptrend.

 

USO (United States Oil Fund)

 

There is little change in USO and it seems to be marking time.  It appears to be roughly on the same wave length as GLD, so we may have to wait until the end of December before USO can find a low.

 

Summary

 

There is a good possibility that the B wave of an intermediate A-B-C pattern is now in place and that SPX has started the C wave.

 

Although there are signs of deceleration in the decline from 1439, there could be a little more selling taking place before we have a re-test of the high in the stronger indices, i.e. DJIA and RUT. 

 

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

© 2005-2014 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

Free Report - Financial Markets 2014