Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Is the U.S. Headed for a Recession? - 1st Apr 15
Did The Fed Just Admit to Deep Uncertainty About Our Financial Security In Retirement? - 1st Apr 15
Gold Price Flat In Quarter In Dollars But 5% Higher In Pounds - 1st Apr 15
Financial Market Extremes: Expect Consequences - 1st Apr 15
Iceland Ponders Radical Banking Plan to Eliminate Fractional Reserve Lending - 1st Apr 15
How Traded Options Can Power a 300%-Plus Gain on Twitter - 1st Apr 15
You Can’t Afford Not to Invest in This Latest Yesla Technology - 1st Apr 15
Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - 1st Apr 15
Bitcoin Price Down Move Still in the Cards - 31st Mar 15
No Body Understands Debt - Living in a Free-Lunch World - 31st Mar 15
Will Gold Win Out Against the US Dollar? - 31st Mar 15
Middle East Balance of Power Matures - 31st Mar 15
Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - 31st Mar 15
Gold and Misery, Strange Bedfellows - 31st Mar 15
Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - 31st Mar 15
Don’t Celebrate the U.S. Housing Market Recovery Yet - 30th Mar 15
A Middle East Nuclear Holocaust - 30th Mar 15
Peak Gold? – Goldman Sachs Research Warns of Peak Gold Production - 30th Mar 15
With Yemen Burning, Arab Spring II Is Underway - 30th Mar 15
No FED Bets From the BIS - 30th Mar 15
Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - 30th Mar 15
Economic Recovery, Geopolitics and Detergents - 30th Mar 15
U.S. Dollar, Commodities and the Gold Miners GDXJ ETF Analysis - 30th Mar 15
Stock Market Short-term Downtrend - 30th Mar 15
David Cameron Election 2015 Debate Facts Check - Employment, Immigration, Debt & Deficit - 29th Mar 15
Stock Market About Ready to Crash! - 29th Mar 15
Reflections in a Golden Eye - Gold Market Rejection, Repatriation and Redemption - 28th Mar 15
Stock Market Inflection Point - 28th Mar 15
Gold And Silver - What Moved Price? Bab el-Mandeb And Uranus Square Pluto. What?! - 28th Mar 15
Stock Market Investment Parachutes; Do You Have Yours? - 28th Mar 15
Peak Gold Misunderstanding, is Gold About to Run Out? - 28th Mar 15
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

Waiting for the Stock Market SPX to Break Key Support

Stock-Markets / Stock Markets 2013 Apr 22, 2013 - 04:46 AM GMT

By: Andre_Gratian

Stock-Markets

Current Position of the Market

SPX: Very Long-term trend - The very-long-term cycles are in their down phases, and if they make their lows when expected (after this bull market is over), there will be another steep decline into late 2014. However, the severe correction of 2007-2009 may have curtailed the full downward pressure potential of the 40-yr and 120-yr cycles.

Intermediate trend - SPX has started an intermediate correction.

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.

SPX TRYING TO HOLD KEY SUPPORT

Market Overview

Last week, SPX started to decline in earnest, and this probably resulted in the promotion of the 1597 top to intermediate status. With last week's retracement, the index has now lost a total of 61 points and, in spite of a 20-point rally by Friday's close, it does not look finished. This time, the DOW industrials joined in with a 443-point loss.

Both indices are in the process of re-testing the support level which contained the 4/05 decline and sent them on to make new all-time highs. However, it is doubtful that it will have the same effect this time. On Thursday, SPX breached 1539 and, although it rallied at the close, it could not stay above 1543 on the final tick. By closing at a new low, it technically puts it in a downtrend which could be nullified only if it went on to make a new high from here, and that does not seem likely. Over the next two weeks, the decline should progress lower and confirm the intermediate correction.

One factor which supports this being the beginning of a significant decline, is the probability that the yearly cycle -- which has been very regular since the 2009 low but pre-dates the bull market -- appears to be repeating its pattern with a high in April, and the next low most likely coming in May or June. We'll see if the market action continues to match former patterns. The only time that the cycle only caused a short-term correction was in 2009, during the very first phase of the new bull market when upward pressure was very strong, and yet, it still managed to create a 4-week decline of 87 points. With the 120-year cycle expected to bottom in October 2014, next April-May will be a time period to watch. In mid-May 2008, the yearly cycle made its high at 1440 and the next bottom was in March 2009, 759 points lower!

Chart Analysis

I am going to start my analysis by bringing back the weekly SPX chart (courtesy of QCharts) which clearly shows the yearly cycle pattern. This cycle has been very regular since the beginning of the bull market and, because it is at an early stage and because of the chart size, the reversal is not very visible in the price itself, although last week's bar is clearly longer than any single week's since 1343, and is evidence that intense selling was taking place. Nor is it visible in the MACD since the lines have yet to cross. But the SRSI has clearly turned down, crossed its lines, and has broken below the previous dip which corresponded to 1498 on the chart.

The sell signals can be seen much more clearly in the daily chart (also courtesy of QCharts). Initially, in the chart itself which shows the price breaking the trend line from 1398 and challenging both the trend line from 1343 and the 1539 support level, but they held and caused the index to rally on Friday. If, on the next challenge to that level the price punches through and closes at a lower low, we will have proof that the yearly cycle is alive and well and that the correction could continue down to one of the two green lines. On the other hand, should the support level hold again and a strong rally ensue, we will have to consider the possibility that the correction is already over.

Analyzing the indicators, the SRSI has given a strong sell signal (but is oversold) and the MACD has turned down (but is still positive). It will have to break below the zero line in order to confirm that the larger decline has started.

Positive divergence has developed in the A/D indicator at Thursday's low. If we are to extend the correction to one of the green lines, we don't want to see significant strength return to this index. The next couple of weeks will be critical in determining the market's intention.

Cycles

The next 7-wk cycle low comes in the third week in May and could end the correction. Market lows also have a tendency to come in July and October, so we will have to see how the market performs after May and if it shows an inclination to extend its decline into one of those time frames.

Breadth

The McClellan Oscillator and Summation Index are shown below (courtesy of StockCharts.com).

These two indicators should help us determine whether the correction stops here or goes lower. The next week is particularly important and our eyes should be fixed on the McClellan Oscillator which, like my own A/D indicator under the daily chart (above), is showing some positive divergence. The bears will not want to see it becoming strongly positive anytime soon. If it does, it would turn the NYSI (and its RSI) back up, suggesting that the correction is probably over.

NYSE McClellan Oscillator Chart

NYSE Summation Index Chart

Sentiment Indicators

The SentimenTrader (courtesy of same) is the other indicator which is causing some uncertainty about the degree of weakness still to come in the market.

The reading of the long term indicator is barely above neutral and this is the most positive this indicator has been in the past 6 weeks. It never did get to the optimistic level desirable to start a significant downtrend. In the record of weekly closings shown here, the worst case scenario was on March 15, when the indicator actually got into the mildly optimistic zone - a considerably more negative reading for the market than the one shown this past Friday . This was followed by an SPX correction of 64 points, and then the index went sideways for a while before making another high.

This indicator alone is not sufficient to determine the state of the market, and it could recede into the green zone as the market declines before we have a low, but it is warning us that we should not expect too much weakness until it actually takes place.

Sentiment Chart

VIX

VIX's attempt at breaking out was stopped by the intermediate downtrend line from 46 as well as the 200-DMA. If it goes through these after some minor consolidation, it will be a confirmation that the SPX is extending the decline that is currently underway.

The P&F chart gives VIX two counts: one to 22 and the other to 27. If the SPX has started an intermediate decline, either one of these projections could mark the low of the correction.

XLF (Financial SPDR)

XLF continues in a strong long-term uptrend, in sync with SPX and, like SPX, will have to drop below its support level (red line) to extend its correction. If it does, a good bet would be a decline to the next short-term low around 17.25.

BONDS

TLT has broken out of a corrective down-channel and, this past week, tried to extend its short-term uptrend. Over the near-term, the upside progress may be limited to the top of the broader channel that is being created. The P&F chart suggests that it could extend the move slightly beyond, to about 127. This is also where it would meet resistance from previous short-term peaks.

GLD (ETF for gold)

Gold suffered a major loss in the past week. When it broke the important support level of 149, GLD collapsed all the way down to 130.51 -- even lower than my next price projection of 134. On a log scale, that put it slightly below the trend line connecting the 2005 and 2008 lows but by Friday, GLD had rallied above it. That trend line represents major support and, with the next 25-wk cycle low due in the later part of June which could bring the index down to 127, a decisive break below it could turn an intermediate correction into a long-term downtrend.

The collapse in gold is part of a deflationary cycle which is affecting most commodities and which could have some longer term implication for them.

UUP (dollar ETF)

UUP is consolidating its recent advance and, in doing so, has found support on a former peak whose level coincides with the 200-DMA. Because it has a P&F count up to 23.30, it is likely that it will try to reach that target after its consolidation is complete. I have drawn a short-term channel in which the index could travel on the way to its projection.

USO (United States Oil Fund)

Oil is another commodity which is being affected by the deflationary trend. I have marked the target which has been generated by the triangle formation and which also coincides with a P&F count. USO is barely halfway to that target. If it is going to meet it, will GLD join it in a continuing decline?

Summary

SPX has returned to the 1539 support level which held the last time it was tested and was followed by a new all-time high. This time could be significantly different if that level gives way, as this would generate much lower prices. While the odds favor the latter scenario, we need to wait for confirmation and it should come over the next week or so.

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

© 2005-2015 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