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
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
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 Fincrew.my - 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
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd 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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market at a Minor Top?

Stock-Markets / Stock Markets 2014 Jun 23, 2014 - 01:07 PM 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, there will be another steep decline into late 2014. However, the Fed policy of keeping interest rates low has severely curtailed the full downward pressure potential of the 40-yr and 120-yr cycles.

Intermediate trend - May be tracing out an ending diagonal pattern.


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.

AT A MINOR (?) TOP

Market Overview

Most likely Friday marked the end of the move which started on 5/15 at 1862, but it is also possible that we are about to correct the entire phase from 1815. Either way, one should be prepared for a correction of at least minor status. It would probably take a technical miracle to keep this uptrend alive beyond Monday.

Why is this practically a certainty? To begin with, the daily indicators are in their worst technical condition since March/April and they could even be compared to last December's. At the same time, the hourly indicators are also in a poor technical condition. This comes at a time when the 1962 P&F projection (which has been mentioned previously a couple of times) has been reached.

The structure also looks complete for at least a minor top and perhaps even a little more. Only future price action will clarify the phase structure that is being completed.

But the sentiment readings are what put the above in context. On Friday, the SentimenTrader closed at 70 for the third consecutive week. Late last December, before the January correction, it had the same reading. Also on Thursday, the P/C ratio closed at 57.9, a fraction lower than its 58.2 reading of last December 31st.

Whatever top we make here will definitely not be the top of the bull market and it would be premature to call this the high point for 2014. We will have to wait and see what kind of correction unfolds and what type of recovery follows.

Let's look at some charts.

Chart Analysis

The weekly technical picture is only barely negative, but a correction of a week or more would most likely turn the weekly oscillator down and increase the negativity of the weekly technical picture. We'll come back to it when this happens.

For now, let's go to the SPX daily chart (courtesy of QCharts.com). Some time ago I discussed the value of using parallel trend lines to mark support and resistance points in technical analysis. The purple lines that I have drawn can be considered to be defining the intermediate trend since the longest one starts in November 2012, at 1343. All lines are drawn from previous short-term lows except for the very outside line which connects four tops between September and December of last year and is the key trend line from which all others are drawn as parallels.

Prices are pulling away more and more from the original line and this illustrates the mild trend deceleration which is taking place in the index. The two recent tops were caused by the second and third parallels. The fourth briefly contained prices in the current phase from 1814, but prices were eventually able to rise above it. If we get the type of correction that I expect, these lines may not be tested again in the future. Most likely, the next move will be toward the lowest line which, if reached, should act as support.

Now that we have identified the top resistance, why do I think that prices will decline from that level? If you look at the indicators, you will immediately see the reason why. All three are showing negative divergence. However, the fact that there is still so much strength in the MACD makes anything more than a minor correction doubtful, unless we see severe, instead of mild, weakness developing.

In the hourly chart we also see strong evidence that we are at a top. With weakness showing in the daily indicators, the condition of the hourly oscillators leaves little doubt that a correction is imminent.

The purple lines which appear here are the parallels discussed in the daily chart. I have also added some more conventionally drawn trend lines, such as the blue lines which make up the channel of the entire phase from 1814 and which has two points of contact on both bottom and top channel lines. There are also two grey lines which frame the steep price rise, and a smaller channel which should be defining the final up-phase. We can assume that the index will start reversing when it comes out of the bottom of that small channel, with the reversal being confirmed when the green trend line is broken. Support could come from the purple line, but the index should retrace to one of the levels indicated on the chart (.382 - .50 - .618). If we are correcting the entire phase from the 1814 low, we should retrace even lower.

Glancing at the oscillators, you can see that, like the daily ones, all three are showing negative divergence and have even started to roll over. This is why I believe that the odds strongly favor a reversal from the 1963 level.

Cycles

From last week: "After the 6-wk cycle, which is now in a downtrend and scheduled to make its low in a couple of weeks, the one which may influence the market the most is the 22-wk cycle which should bottom about two weeks later. The current cycle configuration definitely favors a continuation of the correction, perhaps even into the middle of July."

Helping to reverse the trend, the 4-wk, 6-wk, and 12-wk cycles are all due to bottom next week with the 10-wk and 22-wk due another two weeks afterward.

Breadth

The McClellan Oscillator and the Summation Index appear below (courtesy of StockCharts.com).

At 16, the McClellan Oscillator is barely positive and it is well below its previous high, while SPX made a new high. This is the same negative divergence that we already observed in my daily chart (above).

Nevertheless, by being positive it has caused the NYSI to increase marginally -- not enough to nullify it negative divergence -- and kept the RSI at an overbought level.

NYSE McClellan Oscillator Daily Chart

NYSE Summation Index Daily Chart

Sentiment Indicators

"The SentimenTrader (courtesy of same) long term indicator remains at an elevated reading of 70 for the third consecutive week. Considering the technical condition of the market -- especially of the A/Ds -- the risk of a correction has increased.

Sentiment Weekly Readings

VIX (CBOE volatility Index)

On Friday, VIX made a new 5-yr low. If the market has made a top of some kind, it should now turn up. The high degree of complacency could be dangerous for the market. Other than that, the chart pattern is a wedge formation which could also imply a negative outcome for market prices.

XLF (Financial ETF)

XLF's chart pattern is similar to SPX's but a little weaker. Its indicators also show that it is ready to turn down. However, the long-term trend line is still very much in place with the price still far above it.

TLT (20+yr Treasury Bond Fund)

TLT is consolidating its advance just below the upper channel line. It's probably only a matter of time before it breaks through it and continues its uptrend. Its oscillators have corrected and may be ready to signal another short-term buy.

GLD (ETF for gold)

"GLD is in the process of establishing what could be a triple bottom - which may even turn out to be a valid inverse H&S pattern. If so, the right shoulder should be (just about?) complete since GLD is now in the vicinity of its 25-wk cycle low. With this cycle ready to turn up, it has an excellent chance of rising above its 200-DMA and breaking out of its downtrend. A move above 130-135 in the early part of the cycle's up-phase could lead to a substantial price increase, since the past year was used to build what could be an important base."

Thursday, GLD gapped open and closed well above its 200-DMA. It looks as if the cycle has already made its low and started up. GLD has established a base which could initially take it to the mid-140s.

UUP (dollar ETF)

Now that GLD is apparently breaking out under the influence of its 25-wk cycle, I would expect UUP to do the opposite. That could very well mean a new low for the index.

USO (US Oil Fund)

In spite of the strong Iraq-induced rise in oil, USO does not appear to be making a very aggressive move. It has established a bullish (green) channel, but it is having problem overcoming the mid-channel line resistance. Still, as long as oil is positively affected by the upheaval in that part of the world, I would expect it to continue a moderate uptrend. If things should start to settle down, it should quickly begin to retrace its upward path.

Summary

It took another week for the top formation to ripen and, if my indicators can be trusted, it now looks ready to pick! Besides negative divergences in all the daily and hourly oscillators, a P&F projection has been reached, and the sentiment indicators are also supportive. It certainly seems that everything is in place for a minor reversal. We can decide later if the correction wants to expand to something more.

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

© 2005-2019 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