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
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
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 Due For A Breather (But More To Go)

Stock-Markets / Stock Markets 2015 Aug 23, 2015 - 12:14 PM GMT

By: Andre_Gratian

Stock-Markets

Current Position of the Market

SPX: Long-term trend - Bull Market

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

 

DUE FOR A BREATHER

(BUT MORE TO GO) 

Market Overview

Last week, the dam which had held back a price decline for many weeks, finally broke!  That should put an end to the discussion about whether this is just a long-term consolidation, or an intermediate top. 

There is nothing unusual about the market’s behavior over the past few months.  A period of distribution must occur which will be important enough to produce a decline proportional to the current structure (in this case most likely a primary wave IV).  This requires many reversals in the 3X P&F chart and when the appropriate amount has been met, a decline begins which will fit in the needed structural pattern. 

The water behind a dam is actually a good analogy because by measuring the amount of water which has accumulated, we can estimate how much of a decline we must have before the supply is exhausted.  In this case, we are just starting to empty the first reservoir and by the time it is completely drained, the SPX should be in the vicinity of the October low.  There is a second reservoir of about the same capacity which is also available in case it is required by the structure.  We’ll have to see whether or not it is needed.  If so, it would approximately double the size of the first decline. 

If you think this sounds extreme, consider this!  One of the first things that an analyst learns is that a correction is normally between .382 and .618 of the preceding advance.  This advance (primary wave III) started at 1075 in October 2011 and ended at 2135 on 5/20/15.  That’s a total of 1060 points!  A normal correction would be between 405 and 655 points.  If we retrace to about 1820, that would be 315 points for the first phase.  Double that and you get 630 points, which is right in the ball park.

These numbers are based on the amount of distribution which took place between the market top and 8/18, when the decline started in earnest.  Let’s see if what takes place is anywhere close to these calculations!

Indicators Survey

The weekly MACD waited for the sell signal to go negative, which it did last week.

The daily MACD made its lowest low since Last October’s low which was at about -30.  As of Friday, we were only at -14.84.

(The NYSI is Courtesy of MarketCharts.com)  Last week’s comment:  “There is nothing here to suggest that we are about to see some sustained market strength over the near term.”

The drop has been sudden and, although the index has turned down, there has not been enough time for the A/D action to be fully reflected in the NYSI.  Let’s see what it looks like next week. 

Both P&F charts (1X and 3X) are in agreement.  A short-term low could be reached a few points lower and give us the first rally within the intermediate decline. 

Chart Analysis

  • The following chart of the Daily SPX (chart courtesy of QCharts.com as others below) requires a bit of explanation.
  •  
  • I originally had a narrow pink channel which could have been left as is, but by drawing the bottom channel line across the October low and making the original bottom line the mid-channel line, I believe that it will better delineate the action which is taking place.  Actually, I have drawn two bottom channel lines.  The upper one from the October low is almost exactly a 100% extension of the top line to the new mid-channel line.  Because I think it may be a little conservative for the low of the first phase of the decline, I have added another at the 127.2% extension of the top portion.  These lines should represent the level at which the first phase of the decline will end.
  •  
  • I have also marked in wide gray lines the first two phases of the distribution area up to the 2135 top.  My line of demarcation between the first and second phase is arbitrary but, I think, logical.  Actually, as I have noted on the chart, the entire trading range above the 2040 level (black line) can be considered distribution.  Therefore, my thinking that the correction will be over after we have completed about half of the total distribution area because it would satisfy a primary wave IV structure is also arbitrary.  If the downtrend persisted beyond phase #2, we would have to revise the labeling of the entire structure and consider the probability that we are in a full scale bear market. 
  •  
  • The red channel which was drawn before the decline started, turned out to be correct since the top downtrend line is exactly where the last rally stopped.  However, the width of the channel had to be increased and a new, steeper channel created within to delineate the trend acceleration.  It could set parameters for the short-covering rally which is about to take place.  How it was created will be easier to see on the hourly chart.
  •  
  • We have also broken below the blue uptrend line which is the bottom line of the channel from October 2011 (primary wave III).  That helps to confirm that last week’s decline is the beginning of an intermediate correction. 
  •  
  • The A/D oscillator is very oversold and that, plus the fact that we are near a projection phase, suggests that a reversal is very close.
  •  
  • I have also enlarged the red channel on the Hourly chart and created an experimental black channel which is based on the line connecting three lows.  We’ll see if future prices conform to it. 
  •  
  • On an hourly basis, the A/D has flattened and started to turn up.  This is another sign that a reversal is very near.  Structurally, we may be about to complete the third wave of the move from the 2103 high.   That would put us in 5 of 3, also indicating that a low is near.   The exact projection price will be made available to subscribers (including trial subscribers) in the Monday morning comment.

XBD -- IWM -- SOX

The charts speak for themselves and do not require a commentary. 

UUP (dollar ETF)

UUP may be having a wave 4 correction in the form of a triangle after which it should go on to fill its projected high. 

GLD (Gold trust)

GLD did a good job of bottoming when expected, even moving beyond its conservative 109 projection.  This may be about all we get for now.  Longs should be cautious.  The last few peaks show you how quickly it can reverse when its move is over.  There is also the matter of the incomplete 101 projection which could come in early to mid-October, still a while away, and GLD may have time to correct a couple of points and rise a little higher before making its final low.  It looks like another wave down is necessary to complete the current structure.  Also, note that GDX is not doing much.  Why should it if GLD still has to make a final low before starting a genuine uptrend!   

USO (US Oil Fund)

And there you are!  USO has reached 13.  Even if this is the low, I am not expecting very much after it stops going down (if it has).   Base building may be in order.  Or, it may simply consolidate before dropping to 7 or 8.

Summary

“SPX is undergoing a consolidation in a downtrend using the 200-DMA as support.  A daily close below 2073 which does not hold, should bring about the next challenge to the 2040 major support level.”

That “major” support level evaporated as it became evident that something serious was starting and stocks were still being dumped at Friday’s close.  But we are extremely oversold over the short term and, furthermore, we are approaching a projection from which a short-covering rally is likely to develop. 

Don’t expect this correction to be over in a couple of days!  It has quite a ways to go both in time and in price.

Andre

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