Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Correction In Progress

Stock-Markets / Stock Markets 2013 May 28, 2013 - 03:33 PM GMT

By: Andre_Gratian


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 continues to progress according to its structure. If the count is correct, an intermediate reversal could be on the way, but this may also be only a short-term reversal followed by new highs.

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


Market Overview

Last Wednesday, the SPX had a mini-climactic move to 1687 which ended as a key reversal day. It then went lower the next day, met a phase P&F correction at 1636 (51 points in two days) and bounced. On Friday, a test of that low was followed by another bounce. Buying the dips is fairly typical at the beginning of a long-overdue correction, and this is probably what took place over the past two days. It does not appear, however, that the correction has already ended. Let's see where we are:

Structure: With the nature of the decline, this has become a little ambiguous. We were expecting a minute wave iv, but the correction has already stretched its parameters and if we go lower - as I expect - it may force us to consider something of a larger degree. Let's see how things develop.

Cycles: It looks as if the cycles which I had expected to bottom in early June have begun to exert pressure on price. If my assessment is correct, the correction should continue into that time frame.

P&F projection: Over the past few weeks, it has been difficult to come up with a valid top projection.

Each one was met and immediately exceeded. This is a good example of why using methodologies which complement one another is the best approach to get an accurate read of the market. On the downside, however, the projections are still working just fine. The initial drop to 1636 was right on the money and brought about a good bounce. The next ones will be passed on to subscribers.

Support zone: The first support coincided with the first projection. There are additional support zones which also coincide with lower projections and which will be identified as the index is ready to drop to their levels.

Sentiment: Sentiment figures rose just enough to let us know that a top was imminent. They should now back off into a buy zone by the time the cycles make their lows and the SPX meets its final corrective projection.

Chart Analysis

This weekly chart of the SPX (courtesy of Qcharts) gives us a good feel for the condition of the long-term bull market which started in March 2009. It is alive and well, but in need of a rest which should come in two stages.

Note that prices have moved all the way up to the top of the green channel which could not delineate the long-term trend in a more perfect way. Within that green channel, there are two intermediate blue channels. The SPX is now also trading at the top of the second intermediate channel. And finally, the current short-term trend has now risen to the top of its aqua channel and backed off, breaking out of that channel. The convergence of these channel tops should provide some resistance, and this is one of the conditions to which the market is currently reacting.

However, there is no sign of deceleration in price, nor is there negative divergence in the indicators. Analyzing the patterns of the MACD histogram is instructive. Let's focus on the portions which are included between the parentheses. These represent the short-term trends just prior to an intermediate top. You can see how the green spikes of the one on the left became smaller and smaller until they finally turned negative. The patterns of the two intermediate uptrends nave similar histograms and, if this continues, the second one should remain green a few weeks longer before turning negative.

At the beginning of this analysis, I spoke of two stages which should mark the top of the intermediate trend from October 2011. We are currently in the first stage which should only bring about a limited correction. As it progresses, the histogram should continue to roll over with green spikes getting shorter and shorter. After SPX has completed its minor correction, it should start to rise toward a new all-time high. This will mark the second stage of the topping process, during which negative divergence will appear in the histogram and, when the latter breaks its up-trend line, the SPX will have reached its peak and should begin to decline into what will turn out to be an intermediate correction. This scenario would be a mere continuation of the pattern which is already in progress.

The current corrective pattern is best analyzed on the following hourly chart (also courtesy of QCharts). SPX has now broken two uptrend lines and is consolidating outside of a short-term green channel. The aforementioned cycle cluster bottoming in the first week of June should continue to pressure prices into that time frame. Two downside channels have been drawn on the chart. The index is still confined to both and, even if the first one is breached, may continue its correction within the larger grey channel. This is assuming that the decline is progressing as wave iv which should only bring about moderate weakness. If we start trading below the lower grey channel line, we may have to re-assess the structural degree and pattern formation.

There is an (unlikely) possibility that the cycles will invert and bring about the next and final top of the up-trend from 1343 without prices moving lower. In that case, wave iv would already be done and some strength should start appearing in the market as early as Tuesday.

While the hourly indicators look as if they are bottoming -- which could bring about more upside progress -- the daily indicators don't seem ready to give another buy signal.

Let's see what transpires next week.


Several cycles identified in previous letters should make their lows in the first week of June. If so, continued pressure should bring prices down into that time frame.


The McClellan oscillator and Summation index appear below (courtesy of

The correction has turned the A/Ds negative and this has caused the NYMO to also become negative.

Note that it has reached a level from which it normally rallies. If it does, it would suggest that the correction has been short-lived. However, the position of the longer-term summation index must be taken into consideration when analyzing the NYMO. The NYSI is just starting to come off an overbought condition and its RSI suggests that the correction is only beginning. If it were much closer to the bottom part of its range and the NYMO was at its current level, we could deduce that a new price uptrend is about to start. But it is not, and the overall picture of the two indicators is suggesting that more correction is probable.

NYSE Summation Index Chart

Sentiment Indicators

The SentimenTrader continues to improve its indicator, making it easier to read the market's current sentiment level. In Friday's chart (courtesy of same ) we find the long-term index at 60 (on a scale of 0 to 100). This is one notch down from the more negative 70 where it had been for the two previous days.

Past behavior suggests that it should drop back to neutral or lower before the correction ends.



VIX has shown a remarkable lack of response to the pull-back in the averages. If the correction extends itself, it will undoubtedly react more forcefully with higher prices, but for now, its advance has been stopped by the 200-DMA

There does not seem to be too much concern on the part of traders that the retracement will extend into something major. Is there too much complacency?

XLF (Financial SPDR)

Like SPX, XLF has found resistance at the top of an intermediate term channel which coincides with a short-term channel. The indicator is still near the top of its range and suggests that there should be more of a pull-back. I have drawn a parallel which widens the short-term channel. This often denotes the level where the correction will end. XLF remains in sync with SPX and does not forecast any deep retracement ahead.


TLT has continued to correct down to a support level which should hold it for a while, but it is not certain that it can re-bound significantly from this area, although the indicator suggests that it may be ready to do so. Recent comments by the Fed that it may be ready to scale back its stimulus program have had an effect on bonds and if, as it has been suggested, this takes place as early as June, it may keep TLT and others bonds in a longer-term corrective pattern. The 200-DMA is beginning to roll over, perhaps an indication that a long-term correction has started.


Gold has corrected all the way down to its long-term trend line from 2005. This is a monthly chart (courtesy of which shows clearly that, although gold might bounce from -- and consolidate around -- it for a few weeks or even months, it is not in a position to have a major reversal. The MACD -- although still positive - is still declining sharply, as is the RSI. Furthermore, the RSI is not oversold and may not be for several more months.

The entire picture is long-term bearish and, until it improves significantly, gold is likely to continue its long-term downtrend. Only when deceleration takes place in the indicators and they are in a position to turn up will gold be able to attempt a reversal.

UUP (dollar ETF)

UUP continues its uptrend with occasional consolidations. It is still expected to reach a little higher level, around 23.30.

USO (United States Oil Fund)

USO is still trading within the confines of two converging trend lines, which gives the formation the appearance of a large triangle. Several attempts at moving out of it on the upside have failed and it looks as if the index is getting ready to challenge the bottom parameter once again.


After a little climactic thrust to 1687, SPX formed an outside day, which is normally a sign that the uptrend has ended and is ready to correct.

The correction has started but is not uniform, with DJIA and Russell 2000 resisting the downtrend better than SPX and NDX. Unless they join in, this could be only a short-correction followed by a final thrust to a new high before a much more severe decline begins.



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:


For further subscription options, payment plans, and for important general information, I encourage

you to visit my website at 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

© 2005-2019 - 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