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

First Tier Resistance Breached Key Level Exceeded

Stock-Markets / Stock Markets 2015 Oct 25, 2015 - 12:34 PM GMT

By: Andre_Gratian

Stock-Markets

Current Position of the Market

SPX: Long-term trend - Bull Market?

Intermediate trend - SPX is in the midst of an intermediate correction (at least).

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 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.


FIRST TIER RESISTANCE BREACHED
KEY LEVEL EXCEEDED

Market Overview

After undergoing some price deceleration as it approached the key level of 2040, (thereby suggesting that overhead resistance was having some effect) SPX was given the catalyst it needed to propel it through the obstruction that stood in its way. On Thursday, Mario Draghi made some bullish comments about more stimulus, and this was followed by China cutting its interest rate again on Friday. The index responded with a 60-point move to 2080.

Now that we have overcome the lower resistance band, we should expect higher prices until such time as the typical warnings that we have come to the end of the road begin to appear. These consist of deceleration in price, divergence in breadth and momentum indicators, as well as the refusal of some key indexes to follow the lead of the SPX. Already, as we will see later, last week IWM and XBD increased their relative weakness to SPX by not keeping up with its rally. But the signs are, at best, mixed right now and we will have to see if the upside momentum has enough reserve to take us to a new high. If the August low represented the end of primary wave IV and if we are now in primary wave V, the odds of exceeding 2135 -- which is only 60+ points away -- are pretty good. We should also be aware that when this top is in place, the end of the bear market will be far more likely and not just a false alarm.

Let's take a look at the charts to see where we are!

Intermediate Indicators Survey

Last week, the weekly MACD recovered almost 7 points to -18.30 and is still negative, but the histogram turned positive.

At 100, weekly SRSI has now reached the top of its range and we'll need to wait until it begins to loose upside momentum to signal a reversal.

The NYSI (courtesy of Stockharts.com) has gone positive for the first time since June and has started a good uptrend. However, the degree of overbought conditions in both its MACD and RSI are suggesting that a top may not be far away. Its ability to continue recovering before turning down again will give us some clues about the underlying market strength.

In P&F charting, congestion from the low to the break-out point is the most dependable. That was filled at 2040. We have now started on the count at the left of the low which still has more potential. We'll consider the validity of each phase count by observing price behavior and that of the indicators as the index works its way through each one

Chart Analysis

Daily SPX chart (courtesy of QCharts.com, as well as others below).

This chart has several interesting features that we will address one by one. First, the first tier of resistance was augmented by the top trend line of the red correction pattern. Prior to breaking through it, the index had been drifting away from the top line of its minor uptrend channel and had crossed over to the lower channel line as if it were ready to break out of it. This was obviously a decision point and, as mentioned earlier, a catalyst appeared just at the right time to help it decide for the upside. The former resistance band (marked by dashed lines) has now become a support level.

As a result of its rally, SPX has now reached the bottom of the next tier of resistance which starts around 2075. It is also interesting that, at the same time, the index is now back-testing the bottom channel line of its intermediate blue channel, which should provide additional resistance. It has also reached the green trend line which is drawn across the last two former tops. This green trend line has been discussed before. It extends at a fixed angle of ascent, and all parallels to it drawn from any former short-term low or high point in the market will act as a support or resistance line, depending on the direction from which it is approached.

So we should be at another decision point for the index. It has reached overhead supply, it is back-testing the busted intermediate channel, and is finding additional resistance at the green trend line. How it reacts to this level over the next few days should clue us about its future intentions.

The indicators are giving mixed signals! The MACD remains in an uptrend with only the histogram showing some minor deceleration. The SRSI has tried to correct a couple of times, but could not follow through. The third time could be the charm and signal a correction, especially since the A/D oscillator has shown negative divergence at the last two market peaks, with the second even lower in spite of the strong rally.

Hourly SPX chart.

The resistance at the top of Friday's move consists of the various trend and channel lines discussed above which are more visible on this chart. In addition, the index completed 5 waves from the 2018 level, and the effect of all this is already showing; the top apparently having been made in the next-to-last hour of trading with a move outside of the minor channel in the last hour. This places the index in a good position to open lower on Monday morning and start correcting. On this chart, you can see how the index was rescued just in the nick of time by Mario Draghi's announcement; it was already starting to breach the blue channel.

In the indicators, the MACD is still positive, but not quite as much as displayed by the daily one.

Here, deceleration is at work and evident when comparing the last phase of the indicator to early October. The SRSI started to make a bearish cross in the last hour of trading. The A/D oscillator is by far the weakest, confirming the negative divergence displayed at the daily level.

The first test of the uptrend from 1872 was passed at 2040 with an "A" grade. Let's see how the index handles this second test. After trading for a few more days, we'll find out if we continue to forge ahead or develop some kinks in the rally.

XBD (American Securities Broker/Dealer) and more

It appears that last week's market strength was reflected mostly in the SPX although, to be fair, the NASDAQ 100, SOX and DJIA also had relatively good moves. However, some of the key indexes, the mid-cap and IWM (shown below) were the worst laggards (or is it best?) and the XBD and TRAN did not exactly shine, either.

It is too soon pass judgment on the entire market because of these few leaders' action. For all we know, they may start to catch up over the next couple of weeks. But the last phase of a bear market can be fickle and we should be looking for warnings that this bull is coming to an end. These are some of the warning signs!

UUP (dollar ETF)

The dollar also reacted to Mario Draghi's comments which cause the Euro to retrace and the dollar to surge. This time, it looks as if UUP intends to make a clean break out of its consolidation phase, but it had several starts of this nature before and failed to follow through. Let's see if it does this time. If this is for real, it is now ready to complete the move which was projected when it broke out of its base (to 28/29). What makes this credible is that the base count is now fully confirmed by the re-accumulation level which now looks complete.

GLD (Gold trust)

GLD may be reacting to the strength in the dollar. If the latter has the capacity to rise to its projected high, GLD may still get a chance to reach its unfilled projection of 100!

USO (United States Oil Fund)

Besides the continued crude glut, USO will be affected by the dollar strength as well, and this could also send it to new lows. I know that this may sound ridiculous to some, but if USO just completed a re-distribution phase above 13, it has now the potential to reach the 8 dollar price which was originally suggested by its former count.

Summary

SPX had an original base projection to 2040 which corresponded to reaching the first tier of resistance formed by overhead supply developed during most of 2015. Just as it was about to roll over from that level, it was rescued by comments from Euro Central Bank's president Draghi stating his intention to continue an easy money policy, and by another cut in China's key interest rate. This sent the index soaring some 60 points to another important level where it is meeting with another zone of stiff resistance.

Its ability to push through this level as well should confirm the EWT analysts' premise that we are now in primary wave V and that the index is probably on its way to besting its 2135 high.

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