Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market Last Hurrah?

Stock-Markets / Stock Markets 2015 May 04, 2015 - 03:20 PM GMT

By: Andre_Gratian

Stock-Markets

Current Position of the Market

SPX: Long-term trend - The bull market is still intact.

Intermediate trend - Is the 7-yr cycle sketching an important top?

Analysis of the short-term trend is done on a daily basis with the help of hourly charts. They are important adjuncts to the analysis of daily and weekly charts which ultimately indicate 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.

THE LAST HURRAH???

Market Overview

Last week's SPX high of 2125 stands a good chance of being the peak of the rounding top - a level which may not be exceeded for a long time. At least, not until we first experience a substantial correction that has the potential of creating a decline of between 400 to 450 points, at a minimum.

I know that it sounds like a lot, but it would only approximate a 50% correction of the index's uptrend since October 2011. That also happens to correspond to a minimum P&F count of the distribution pattern that has been formed since the October 2014 low.

This will only be authenticated by future market action, but everything finally seems to be in place from a technical point of view for the long-awaited correction to start. If this is truly a rounding top, don't expect prolonged weakness to start right away. For a while, we may only create a pattern of limited declines and rallies with a downward slant which will eventually accelerate and conclude in a climactic bottom. When will that be? Whenever the 7-year cycle bottoms several months from now.

The battle lines appear to have been drawn between the former high and the 2040 level. Breaking below 2072 should be the first sign that the proposed scenario is beginning to materialize.

Indicators Survey

The weekly momentum indicators were rescued from extending their decline by Friday's sharp rally but both the daily MACD and SRSI were left in a bearish configuration, as well as the A/D oscillator, in spite of that rally.

The Summation Index (chart below courtesy of StockChart.com) turned down last week after diverging sharply from the March peak when SPX made a marginal new high. Both the RSI and MACD have also turned down after exhibiting the same kind of negative divergence. This is a bearish pattern which will worsen if the NYSI drops below its former short-term low of 341.

SPX was kind enough to fulfill the 1X Point & Figure projection which was stated in last week's letter. This was followed by a 47 point decline which ended with a bounce on Friday. If the market resumes its downtrend this week with a decline below 2072, I will feel confident the scenario discussed above has started to prove correct.

The 3X price chart may have had its last rally from the trend line drawn from the October low.

Chart Analysis

Let's start with our analysis of the daily chart of the SPX (courtesy of QCharts.com, as well as others below).

The (green) trend line from the October low was first tested in early March and has held. On the next three subsequent lows, it was slightly breached, but the index was able to work its way back above it each time. The third time even brought about a marginal new high about 6 points above the February high before the trend line was broken once again, this time taking prices a little deeper. Friday's rally stopped short by three points of going back above the trend line. If the rally from Thursday's low fails to do so and the index declines below 2073 with a follow through beyond the 2039 level, this will just about confirm that an intermediate decline has started.

On the Summation Index chart (above), I previously pointed out that a significant deceleration pattern had formed since the high that was made right after the October 2011 low. This has gotten worse since the October 2014 low and, we may finally be witnessing the final warning in the form of negative divergence in the NYSI vs. the 2125 SPX high.

The daily indicators are also in a downtrend and they would require substantial short-term market strength to improve their patterns. This is why next week will be a time to keep a close eye on the price and A/D performance.

On the hourly chart, Friday's rally started after the index found some support on a parallel to the line connecting the last two short-term tops. It then found resistance on another parallel which is closer to the top line. Note that these parallels are not drawn arbitrarily. Several points where price stopped either on the way up or down align themselves perfectly on each parallel. If SPX cannot rise above the top parallel on Monday, odds will begin to favor a continuation of the decline.

All three oscillators appear ready to reverse. This would come at a time when the daily indicators are already in a downtrend, when the Summation Index and its indicators have already reversed, and when the SPX weekly momentum oscillators are also ready to turn down at the least provocation! In other words, all the indicators of the various time frames appear to be on the verge of making a synchronized move to the downside. If this happens, it would add greatly to the already bearish picture.

"The following indexes have proven themselves to be market leaders. Since the market appears to be at an inflection point, they should be carefully followed for potential signs of further deterioration."

Of the four that I posted last week, two showed visible deterioration: TRAN and IWM

TRAN

TRAN, which had rallied from the bottom of the declining channel almost retraced its rally entirely and it did not have that much of a bounce on Friday. Since this could merely be a retest of the low, let's see what happens next week.

IWM

IWM probably performed as poorly as any index when it dropped from a point very close to its high, finding support at the bottom of the purple channel. This was its weakest decline since January and its rebound also left a lot to be desired. It will need some close scrutiny next week!

QQQ

QQQ, which is based on the NDX (recently the strongest component of the stock market), is shown here because it was mentioned in the Market Overview last week for having made what was thought to have been an exhaustion gap. So far, that appears to be the case. Note that for the past two years, every time the index had an exhaustion gap, it was followed by a decline, the worst one being last October. It is too early to foresee how much weakness will follow this time but, if it breaks below the line connecting the thee short bottoms, it could keep going for a while.

UUP

The dollar index continues to correct after its long and steady uptrend. Although it has higher P&F counts, these do not tell us when (or even if) these will be filled. The index has not done anything yet to suggest that this is more than a normal correction after a very strong rally.

GLD

GLD is now in the time frame when its 25-week cycle should make its low. How much of an impact this will have on the price of gold is questionable since this cycle will be over-ridden by larger ones which are not due to bottom until late June.

USO

The corrective move in the dollar is a reprieve for USO which is also in a corrective wave after its strong decline. The index could make a little more headway before seeking a more lasting low in the vicinity of its price projection.


Summary

The technical condition of the SPX strongly suggests that it is ready to start a correction of intermediate proportion. A decisive price decline below 2073 would be the first inkling that this is taking place, especially if it is followed by a move below 2039. Further deterioration in some key indicators such as IWM, TRAN, QQQ, etc... will also be necessary.

There have been many false starts which were followed by rallies to new highs. Some EW analysts hold on to the belief that we are undergoing a lengthy consolidation which will lead to the index soaring up to much more lofty heights!

As always, the market will have the final say in what IT wants to do!

FREE TRIAL SUBSCRIPTION

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: info@marketurningpoints.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

6 Critical Money Making Rules