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
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
Sheffield Roma Crisis School Place Application's Fraud Perfect Storm - 17th Oct 14
Stock Markets, Commodities and Indicators - 17th Oct 14
“Save Our Swiss Gold ” - Game Changer For Gold? - 17th Oct 14
How to Trade the Ebola Stock Market Sell-Off - 17th Oct 14
When... Not if... Crude Oil Price Drops Below $70 - 17th Oct 14
Either You're The Butcher or You're The Cattle - 17th Oct 14
Gold Benefits from Market Uncertainty - 17th Oct 14
Stock Market Pullback Underway, Euro downside, Commodities - 17th Oct 14
Stock Market Seven Year Cycle and A Correction Ahead? - 17th Oct 14
Three Ways to Play Uranium: Top Stock Picks - 17th Oct 14
America Flirts With Deflation - 17th Oct 14
Why the Fed Should Consider Delaying the End of QE - 16th Oct 14
Gold Prices Since 9-11 - 16th Oct 14
The Inflation Imputation, Dear Saver, May You RIP - 16th Oct 14
Flight To Safety - Gold Rises As Stocks, European Bonds Sink - 16th Oct 14
The March Of History And The End Of Nations - 16th Oct 14
Stocks Bear Markets Move Fast and Are Intensely Emotional - 16th Oct 14
Stocks Got Their Piece – Now It’s Our Turn - 16th Oct 14
Why This Stock Market Selloff Is the Next "Buy the Dip" Opportunity in Stocks - 15th Oct 14
Possible Stock Market Runing Correction - 15th Oct 14
Get Your Tactics Ready for the Ebola Stock Market Event - 15th Oct 14
Secret Scheme To Manipulate Silver Price - Lawsuits Against Banks Proceed - 15th Oct 14
Stocks Bull Market Over? Trend Forecast to End Jan 2015 - Video - 15th Oct 14
Stock Market Dow The Contrarian Play - 15th Oct 14
The Ukraine, As We Know It, Is Gone Forever - 15th Oct 14
We Can Police the Dark Web / Bitcoin - 15th Oct 14
The Safest Stocks in the World - 14th Oct 14
Building an Ark: How to Protect Public Revenues From the Next Financial Meltdown - 14th Oct 14
9 Ways to Retire Rich - 14th Oct 14
Silver, Warfare and Welfare - 14th Oct 14
Swiss Gold Referendum “Propaganda War” Begins - 14th Oct 14
What Happened To The Fourth Estate? - 14th Oct 14
How To Blow Up OPEC In 3 Easy Steps - 14th Oct 14
Investment Myth - Wars are bullish/bearish for Stocks - 14th Oct 14
Powerful Reversal and Shakeout in the Junior Gold Mining Stocks at May Lows Around $33 - 13th Oct 14
When The Economy Went Ponzi - 13th Oct 14
Stock Markets Get Ugly – and May Be Getting Uglier - 13th Oct 14
Cycle Failures Point to a Stock Market Correction - 13th Oct 14
Bill Ackman: I'm not a Crybaby Shareholder - 13th Oct 14
U.S. and World Stock Markets Chartology - 13th Oct 14
Stock Market Intermediate Downtrend Confirmed - 13th Oct 14
Gold and Silver Price To Rally Or Not To Rally - 13th Oct 14
Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - 12th Oct 14
Has Obama Changed His Mind About Syria? - 12th Oct 14
New Zero Bound Only Game In Town - 12th Oct 14
The 5–Year U.S. Treasury Bond is Emblematic of Careless Risk Taking in Bond Markets - 12th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

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

© 2005-2014 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