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Trading Lessons

Will the SPX Stock Market Final Surge Fail to Appear?

Stock-Markets / Stock Market 2017 May 16, 2017 - 06:02 PM GMT

By: Anthony_Cherniawski

Stock-Markets

The Wave structure on the left is a likely scenario on how the SPX may play out. This morning’s decline appears to be Wave c of (iv). Wave (v) may now be underway. As far as Wave relationships go, Wave [c] equals Wave [a] at 2405.86, while Wave (v) equals Wave (i) at 2410.24. Wave 5 equals Wave 1 at 2415.05. Cycle Top resistance on the hourly chart is at 2413.67. That gives us a range in which SPX may reverse course.


A decline beneath Short-term support at 2392.74 suggests the top may be in. SPX may be showing signs of being unable to make a new high.

VIX appears to be holding up better than expected, given the potential for a new high in the SPX. The pattern appears to be corrective, suggesting new lows may be minimal. Wave (v) is usually the weakest in the SPX which is often indicated by a rally in VIX as the SPX finishes its topping process. However, there may be pressure on the VIX to spark a momentum rally in SPX.

Investors are scrambling for low volatility ETFs as the market matures and may be ready to turn against them. Bloomberg reports, “To find a low-volatility stock in the U.S. market this year, throw a rock. And yet plenty of people are still paying for the privilege.

Flows into the biggest exchange-traded fund tracking the companies have been positive for six of the last seven weeks and totaled $238 million last month, the most since July, according to data compiled by Bloomberg. Investors withdrew money in the five months through February after a yearlong buying bonanza that added almost $9 billion to the fund.”

USD/JPY futures plunged to 112.97 this morning, making a new low and potentially setting up for a challenge of the Lip of the Cup with Handle formation. You can see that we may be expecting a Master Cycle low in the very near future. If it should come beneath the Lip, then a very bearish setup may present itself.

ZeroHedge reports, “Having reached new record highs at the open amid yet another panic-buying scramble, stocks have turned down dramatically this morning (seemingly around the Industrial Production data). VIX is up modestly but as the dollar index weakens, USDJPY has tumbled back below 113.00...”

Regards,

Tony

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As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals.

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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