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
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is Dow 20,000 a Bridge Too Far?

Stock-Markets / Stock Market 2017 Jan 23, 2017 - 02:05 PM GMT

By: Andre_Gratian

Stock-Markets

Current Position of the Market

SPX Long-term trend: If the market strength persists, the long-term trend may need to be re-evaluated. 

SPX Intermediate trend: SPX intermediate P&F count to 2300 is still possible before a reversal occurs.

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 discuss 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 anvi1962@cableone.net.

Is 20,000 a Bridge Too Far?

Market Overview

On 1/06, the Dow reached 19,999.63 and started correcting. Last Thursday it got down to 19,678, but had a good bounce on Friday. However, time is running short to reach the magic number; as it is for SPX to reach 2300, especially with a minor cycle low due in early February. There could be an intervening high before then, but if it comes on Monday, we could see a short-term decline taking hold for the next two weeks and, if SPX drops below 2230 over that time frame, we may have missed our chance to print 20,000 DJIA and 2300 SPX!

Intermediate cycles are topping and are expected to pressure the market into April, so we may be witnessing the high point of the bull market; although, if this decline is not too severe, there may be one more and final opportunity after the April low. The amount of distribution which has taken place over the past month is already enough to generate a downtrend of at least 100 SPX points. That would not guarantee a long-term reversal, but if we fail to make a new high on the next rally, this is when things could become really negative!  The monthly money flow indicator (a volume-weighted version of the RSI) has correctly called the past two bull market peaks (in 2000 and 2007). Today, its divergence with the SPX is far worse than it was at the previous peaks.  In addition, geopolitical storm clouds are gathering over some of the world's largest economies: Europe, China, and Russia. (See article by George Freeman on the Market Oracle)

Analysis

Daily chart

The move from 1810 looks like a wedge or, if you will, an ending diagonal, which is a bearish pattern. A characteristic of a wedge is that it normally retraces down to the start of the formation so, if the uptrend does not regain its upside momentum soon, it will roll over and probably initially challenge the uptrend line which is currently at about 2160 and runs in approximation with the 200-DMA.

The index has traded in a narrow range for the past month and is probably forming a distribution pattern which is very similar to what it did at the last August short-term top. When the sellers finally overwhelm the buyers, the result will be the same as it was then, except that the decline may be steeper because 1) the index is even more overbought this time, and 2) because the intermediate and long-term cycles which are turning down are even more advanced and should apply more downward pressure.

The price trend which started at 2084 evolved into a channel which was breached when SPX retraced to 2234 (horizontal red line). The rally tried to hold within the channel line for a few days but gave up as the trend turned sideways, forming either a consolidation pattern to move higher (2300?), or preparing to roll over and start a decline. The extension of the original trend line across 1810 and the Brexit low (1992) seems to have provided support for prices over the past couple of weeks. A downward penetration of that dashed trend line would most likely start a reversal, and if prices drop below the red horizontal line, an intermediate correction will be on its way.

All three oscillators are showing increasing weakness. They have turned down after showing the negative divergence which was lacking at their former peak, and have made bearish crosses in their MAs. The lower two attempted to develop an uptrend, but the MACD never did give a buy signal. It did find support on the zero line on the first pull-back, but it looks ready to drop below, this time. In other words, all three oscillators, unless they are rescued by an immediate strong wave of buying, are currently screaming "sell".

This chart and others below, are courtesy of QCharts.com.

Hourly chart

The (assumed) distribution pattern of the past month is shown in greater detail on the 60m chart. The dashed blue lines are parallels to the top purple line which itself, is the top of the wedge discussed earlier. They provide points of support and resistance to the near-term moves. The lower, heavier dashed purple line is also a parallel to the top one and is the mid-channel line of a lateral channel which has the Brexit low as an anchor point for its lower trend line (see daily chart). That pattern may turn out to be an important analytical tool for the price action of the next few weeks.

Getting back to the hourly chart, the minor black uptrend line was breached on Thursday, but prices recovered enough on Friday to suggest that the index is getting ready for another small push upward. There is a 15-day cycle due on Monday, and if it turns out to be a high, we could be looking at a decline into the first week of February starting Tuesday -- unless that cycle inverts and becomes a low. If that's the case, we could still get up to 22,000 and 2300.

The oscillators have turned up but, as you can see, there has been a great deal of volatility lately, even intra-day. Monday's action is key to the entire week.

An overview of some major indexes (Weekly charts)

It was another week of consolidation/topping behavior in all indices shown below, except for the QQQ (top right) which made a marginal new high. However, it is still one of the weakest since it is playing catch-up to the others and its MACD continues to show significant negative divergence. Also, the current uptrend is in the form of an ending diagonal. It is noteworthy that both the TRAN and NYA (bottom left) have, so far, failed to overcome their previous highs. The total picture is that of a market whose rally has run out of steam and may be about to reverse.

UUP (dollar ETF)

UUP continues to pull-back from its recent multi-year high and appears to have found support on its intermediate trend line. This is a strong support level since it incorporates several price peaks made in 2015. Continuing to decline below the horizontal red line could turn out to be an important reversal.

GDX (Gold Miners ETF)

GDX appears to be ending its break-out wave with a small ending diagonal.  If that's the case, it should remain below the trend line drawn across the tops or, if it penetrates it, should pull back immediately. Failure to do so would be an extension of the uptrend.

Both indicators are on the verge of giving a sell signal which would be confirmed by a close below 22.00

Note: GDX is now updated for subscribers throughout the day, along with SPX.

USO (U.S. Oil Fund)

USO continues to hold on to its short-term support. Breaking it would entail a return to the major trend line.

Summary:

Last week was not decisive since SPX continued to trade in a narrow, volatile range. The coming one should be if on Monday we rally into a 15-day cycle top and reverse on Tuesday without having reached the ultimate 2300 projection. In that case, we could continue to decline into early February.

On the other hand, a low on Monday would muddy the trend pattern, perhaps for the entire week, but could provide an opportunity for SPX to reach 2300.

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