Best of the Week
Most Popular
1.US Dollar Crashes, Gold And Bitcoin Skyrocket As Economic Recovery Lie Is Exposed - Jeff_Berwick
2.Now Obama Warns Americans to ‘Be Prepared’ for Disaster… What Does He Know? - Jeff_Berwick
3.EU Referendum - Britain's Immigration / Migrant Crisis Explained - Nadeem_Walayat
4.EU Referendum - British People vs Establishment Elite, Vote LEAVE an Act of Defiance! - Nadeem_Walayat
5.Prominent Billionaire Investors Warn of Financial Crash, Quietly Position Themselves - MoneyMetals
6.Bankers Warn of BrExit Financial Armageddon if British People Vote for Freedom - Nadeem_Walayat
7.Bad U.S. Jobs Report Prompts Stocks Bear Market Rally Towards New All Time Highs! - Nadeem_Walayat
8.Gold And Silver – Friday May Have Marked A Pivotal Turnaround - Michael_Noonan
9.EU Referendum - British People vs Establishment Elite, the Illusion of Democracy and Freedom - Nadeem_Walayat
10.Felix Zulauf: Monetary Stimulation Creates Bubbles, Not Prosperity Nor Growth - GoldandLiberty
Free Silver
Last 7 days
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16
Could Central Bankers Be Gold and Silver's BIGGEST Allies? - 20th June 16
Words Still Mean Things – Brexit With Graham Mehl - 20th June 16
Baroness Warsi the Manchurian Candidate Quits LEAVE for REMAIN, Boris Johnson Next? - 20th June 16
FTSE Soars, Stock Markets Bounce on LEAVE Polls Surge, Bookmakers Widen BrExit Odds - 20th June 16
Brexit Would Trigger Devolution of Europe - 20th June 16
Stock Market Week Of Uncertainty - 20th June 16
Will Gold’s Bullish Price Chart Outperform Gold’s 5 Bearish Indicators? - 20th June 16
Bonds And Stocks At All-Time Highs: Are Markets Confused Or Broken? - 20th June 16
Silver Sleeping On the Job - 19th June 16
BrExit Odds Sink, REMAIN Polls Boost by Jo Cox Killing by Radical Right Extremist, Conspiracy? - 19th June 16
How Elliott Waves Tell You When to "Jump In" & When to "Jump Out" of Markets - 18th June 16
Stock Market Inflection Point During Bifurcation - 18th June 16
Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - 18th June 16
Gold Stocks - Bull Markets that Follow Epic Bears - 18th June 16
The Fed Giveth and the Gold Bullion Banks Taketh Away… - 17th June 16
Brexit: "The Vote Heard Around the World" - 17th June 16
Gold Stocks Summer Breakout? - 17th June 16
Stock Investors Get Higher Returns and More Dividend Income - In Less Time With Less Risk - 17th June 16
How to Use the Gold-to-Silver Ratio? - 17th June 16
Inflation, Deflation & Associated Trading Prospects - 17th June 16
Overnight Markets Struggling to Stay Flat - 17th June 16
Gold Price Surges to Highest in Nearly Two Years On Central Bank and Brexit Haven Demand - 17th June 16
Stock Market Thinking Upside Down; Dow 18k Still Key - 17th June 16
Jo Cox MP Terror Attack Killing Claimed for "Britain First" - Witness Report - 17th June 16
Stock Market, Iron Ore, Bitcoin – Is Silver Next for Chinese Momentum Investors? - 16th June 16
EU Referendum Campaigning Suspended Following Shooting of MP Jo Cox, Suspect Named as Tommy Mair - 16th June 16
Why People are Migrating to the UK, Illegal Immigration, Housing Crisis Consequences - 16th June 16
Stocks Fluctuate Following Recent Decline - Bottom Or Just Pause Before Another Leg Down? - 16th June 16
The US Consumer-Driven Economy Has Hit a Brick Wall - 16th June 16
Bitcoin Price Going Parabolic Again, Now At $730 and Up 60%+ In Last Three Weeks - 16th June 16
China's Hard Landing Has Already Begun! - 16th June 16
Crude Oil Price - Oil Bears vs. Support Zone - 16th June 16
Central Bankers Are Wrong About Inflation and Deflation - 15th June 16
Alignment Of The Dow, Interest Rates, Debt and Silver Cycles Will Deliver A Fatal Blow - 15th June 16
Stock Market Bounce May be Over - 15th June 16
EU Referendum: Have the Bookmakers Got it Wrong? LEAVE Opinion Polls Lead - 15th June 16
Gold Price Rally - 15th June 16
How to Invest for Brexit Report - 15th June 16
Stock Market Short of the Decade? - 15th June 16
Stock Market Sell Off Coming! - 14th June 16
QE - The Good, Bad & Ugly - 14th June 16
This Demographic Shift Makes Our Social Security Useless - 14th June 16
Gold Stocks Ultimate Objective in a World of Monetary Transition - 14th June 16
Philosophy of the New World Order - 14th June 16
The Brexit Game - Boris Johnson vs David Cameron EU Referendum Zombies - 14th June 16
EU Referendum: LEAVE Opinion Poll Lead of 51% to 49% Whilst Bookmaker Odds Still Strongly Favour REMAIN - 14th June 16
George Soros Making Big Bets on Gold - 14th June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Stock Market Wave C Fiscal Cliff Plunge Risk

Stock-Markets / Stock Markets 2013 Dec 24, 2012 - 05:13 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 severe correction of 2007-2009 will have curtailed the full downward pressure potential of the 120-yr cycle.

 

SPX: Intermediate trend –  SPX made a top at 1474 and is engaged in an A-B-C intermediate correction.  It is possible that wave “B” was completed at 1448.


 

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

 

It is obvious that the near-term direction of the market has been influenced by negotiations to resolve the “fiscal cliff” situation.  Optimism about an early solution has kept the trend bullish until Thursday, when the mood of the house republicans dashed hopes for an immediate resolution and caused the market to drop sharply at the opening.  Although it did recover some of its losses by the close, enough technical damage was done to bring the indices very close to a sell signal.

 

With Monday being a shortened session, we may have to wait until Wednesday to see if we can drive the proverbial final nail in the coffin of the “B” wave.  When the “C” wave of the intermediate correction starts in earnest, we can expect something similar to the “A” wave from 1474 and, if the time span of the “C” wave is equal to that of “A”, it could last until mid-February before it is complete. 

 

Of course, we have to consider the possibility that 1474 was the top of the bull market and that we are now on the verge of a new bear market.  Some EW technicians see the pattern described by the DOW since April 2011 as a large diagonal triangle which would characteristically put an end to the bull market that started in 2009.  Whether or not this is the case is something we do not have to be concerned about just now.  We already agree with the bear view that a significant decline is coming, early next year.  What happens after that is something that we will have to assess at the proper time.  Our present analytical efforts should be to determine whether the “B” wave (or “2”) already ended on Thursday of last week, or if it has a little more to run. 

 

Attempts at establishing a price projection for the SPX has produced two possibilities:  1443 and, if there should be a final surge, 1464.  The index price has been hovering around 1443;  first with a reversal from the 1439 level, and another, Tuesday, from 1448.  Technical considerations suggest that the rally is in its last stages and looking for a final high.  Perhaps it was already met on Tuesday, but we’ll need confirmation.  There is a good possibility that next week will give it to us.

 

Chart Analysis

 

This weekly chart of the Dow shows the two possible scenarios that lie ahead for the market.  In the bearish case (which is not favored) we would be ending wave 2 and be about to start wave 3.  That wave would most likely be a period of intense weakness probably taking the index to the level of “B” before it ends.  Needless to say, it would be devastating to investors, re-sending their 401Ks right back into the tank.  But that would only be the beginning of a vicious bear market which, according to cycles, should continue until the low of the 120-yr cycle around October 2014.  

 

 

The bullish view would be far less harsh.  The intermediate decline would conclude early next year, and the bull market would go on to make a new high, peaking perhaps around May 2013.  It would then start a bear market into October 2014 which would be bad enough, but not nearly as severe as the first scenario.  This is the option which I favor. 

 

One of the weakest indices is the NDX.  It has retraced less of its decline from the September high than the SPX or Dow, and is the one most ready to sell off whenever there is a pull-back in the uptrend.  Friday was a good example of this tendency.  Although (like the overall market) it had regained a good portion of the day’s loss by the close, it remained below both moving averages -- the only one of the three to do so.  Since NDX normally leads the market, its relative weakness is an indication that we are in a correction phase and have not started another uptrend.  Also, the pattern that it is making is a small diagonal wave which was probably completed on Wednesday.  A signal that the “C” wave is on its way will be confirmed when it closes below the red horizontal line. 

 

The indicators are also showing some weakness, especially the histogram which exhibits a strong pattern of negative divergence to the price.  The RSIS is overbought, has already turned down for the second time, and its lines have already made a bearish cross.  It does not look like a confirmed sell signal is very far away.

 

 

The SPX, which has been buoyed by strength in financial stocks, is the strongest of the three indices shown, but its hourly chart (below) shows that the pattern it is making is also a bearish wedge which may have been completed at 1448.  If so, there is a good chance that on Monday, there will be

 

another near-term decline before we have a bounce.  The price formation made during Friday’s recovery looks like a small bear flag on the hourly chart.  If it is, the index risks dropping to about 1412-13 – the length of the flag mast.  Coincidentally, this is also a near-term phase projection for this index according to the level of distribution above. 

 

The indicators have rallied along with the price on Friday, but not enough to give an hourly buy signal by the close.

 

Cycles

 

For a while, we have been looking for the declining 66-week cycle to reassert itself and lead the market lower into early 2013.  It is overdue!

 

Breadth

 

The McClellan Oscillator and the Summation Index (courtesy of StockCharts.com) are posted below.  They look like the price charts:  toppy – especially the NYMO where a significant deceleration pattern  has resulted in substantial negative divergence, but they have not yet given a sell signal. 

 

The RSI of the NYSI has now entered the overbought zone and will probably precede its index in turning down.  This should happen as soon as the NYMO turns negative.

 

 

Sentiment Indicators

 

“The short-term signal of the SentimenTrader (courtesy of same) has come dead center and could not be more neutral. “

 

What else is there to say?

 

 

VIX 

 

VIX had some interesting moves this week.  I will preface comments about the chart with a couple of emails which I sent my subscribers on Thursday: 10:44 am  Something interesting is happening to VIX which has shown a lot of strength in the past couple of days.  This morning it traded at its highest level since mid-November.  If it keeps going, it will spell trouble for the market.  3:29 pm  I am getting concerned by the action of the VIX which is on its high of the day and climbing.  This is a sign of caution which should not be ignored. 

 

You know the rest!  At Friday’s opening, futures were down 21 points.  Another remarkable act of foretelling by the VIX.

 

That said, and although intraday it rose to the highest level since November, the index did pull back sharply at the close, indicating that it might have a little more work to do before a complete break-out which, conversely, would suggest that the market may have to do the same before starting a significant drop.

 

 

XLF (Financial SPDR)

 

There does not seem to be any way to halt this runaway train (whose behavior has greatly impacted that of the SPX), except that the SRSI has now made a triple top, and negative divergence has now formed in the CCI.  Could that be it?  Not to mention the negative candlestick pattern which developed on Friday.  Could that mean that it is finally ready to reverse?  We’ll find out next week.

 

 

 

BONDS

 

TLT seems to be holding above the level of the former low that it tested four days ago.  If it continues to do this for the next few days, it will probably be ready to have another go at re-establishing its uptrend.  This would certainly be true if the market is ready to correct for the next couple of months.  Let’s give it a chance to confirm its intention and we’ll see what the P&F chart projects for an up-move.

 

GLD (ETF for gold) 

 

“…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.” 

 

Like a well-trained dog who obeys his master’s commands, GLD lived up to its expectations and dropped down to its next support level and projection.  There could be a little more decline to 157, but the index should now start to build a base, assisted by the 25-wk cycle which should slowly start to turn up.  We’ll discuss the longer-term prospect for GLD after that base is built.

 

UUP (dollar ETF)

 

Like TLT, UUP may also have found the support level needed to halt its decline and complete its correction.  The next few days should tell.  In any case, it would be logical for the index to start up as the market begins to correct.  The two are usually in reverse sync.

USO (United States Oil Fund)

 

USO continues to be of little interest to traders and investors.  It will have severe technical complications if it tries to go up and therefore may not even attempt to.  The intermediate line of least resistance is probably still to the downside and it would not be surprising to see it trade around 28-29 over the next couple of months in conjunction with a market decline.

 

 

Summary

 

With the end of the month fast approaching and still no resolution in sight over the country’s fiscal problems, every day is another opportunity for the market to start wave “C” of its intermediate correction from 1474.

 

Andre

I want to wish all my readers

 

Happy Holidays

&

a Prosperous New Year

 

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