Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Gerald Celente: Why You Still Need Guns, Gold, and a Getaway Plan... - 23rd Jun 18
Cheap Gold Stocks Bottom Basing - 23rd Jun 18
A Trade War Won’t Be Good for the US Dollar - 23rd Jun 18
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Stock Market Correction Phase

Stock-Markets / Stock Market 2017 Nov 12, 2017 - 05:39 PM GMT

By: Andre_Gratian

Stock-Markets

Current position of the market

SPX: Long-term trend – The bull market is continuing with no sign of a major top in sight.
 
 Intermediate trend –  Soon coming to an end.

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

Correction Phase

 

Market Overview

On 11/07, SPX appeared to make a short-term top at 2597.02 which was re-tested successfully the next day at 2595.47 before pulling back sharply down to the 2566 support.  It was unfortunate that we did not go a little higher on the second top, since it looked as if an ending diagonal triangle was forming, and the higher high would have confirmed the “e” wave of the pattern.  However, I have it on good authority (intelligentinvesting.com) that it does not matter, because the pattern still qualifies as an ending diagonal.  That being the case, it is probable that the correction is not over and that lower prices will be seen before it is.  That would not be surprising because there is a minor cycle due in a few days that could keep SPX moving in a southward direction until its low.

What is unclear is: do we continue our 2566-low b-wave bounce, or do we resume the downtrend as early as Monday.  On Friday, corrective action formed a small base on the P&F chart which could take us to a new recovery high before the start of the c-wave.  Guess we’ll just have to wait until Monday to find out.

Generally speaking, the market is getting closer and closer to an intermediate top – about another month would be my guesstimate – which would give us the first significant correction in some time.  In a strong bull market, it takes a while before we have the right conditions, and these are fast approaching.  The 40-wk cycle, which is responsible for the nearly straight-up trend which started in mid-August, is beginning to lose some of its mojo and that will make the index vulnerable to the cluster of important cycles bottoming in December and January.  So, the bears should soon be able to breathe normally again, at least for a little while!

Chart Analysis  (These charts and subsequent ones courtesy of QCharts)

SPX daily chart:

As noted on the chart, the blue channel delineates the bull market leg which started at 1810, in February 2016.  I mentioned a couple of months ago how remarkable it was that the 233-DMA was tracing out the bottom of the channel, and the 55-DMA its mid-channel line.  As you can see, this has continued in the same vein.  But not for very much longer!  We are about to have a correction that will dramatically alter this near-perfect relationship.  I don’t yet have a measurement for the expected  intermediate correction because, with the action of the last couple of weeks, the distribution top has just begun to form.  You can see on chart that the price action is beginning to become congested, and this should increase as we continue to correct and make the final top in the next few weeks.  Once that topping formation is complete, the P&F chart should give us a good count of what to expect. 

The upward slanted red trend lines outline the ending diagonal triangle which has been forming.  As you can see, the break of the bottom trend line was fast and sharp, and it immediately reversed on the same day that it broke from the first support level at 2566, giving the appearance that the correction was over.  But it’s probably not!  For one thing, diagonals tend to retrace their entire length to the point where they originated; in this case it would be to the heavy red horizontal line at 2544.  Secondly, the cycle which is responsible for this correction (there is always one behind every correction) is not due to bottom for another few days.  That gives us something on which to fix our “expectations”, with the caveat that the market does not always do what we expect! 

As additional proof that we may be correct, the oscillators at the bottom of the chart have all reversed in patterns which are still weakening, and with no trace of reversing despite the two-day hold in the market.  When they reverse, it should signal that the correction is over and that we are probably on our final short leg of this advance. 

SPX hourly chart:

Under the magnifying glass effect of the hourly chart, you can see the ending diagonal triangle, and how it broke suddenly when complete – well, almost complete, since we did not make a new high but had to be satisfied with a truncated wave “e”.  In any case, it should not change the normal behavior of an EDT correction.  The start of the correction was normal: a sudden break of 29 points, followed by a bounce of 20 points (all on the same day) before things started to settle down.

On Friday, we pulled back and did some basing which has a potential of taking us up to about 2495, before coming to the second down phase of the correction.  Since a move to 2495 would give us a second bounce equal in length to the first, thereby creating a measured move, the odds are pretty good that this is what we will be doing before continuing the correction.  The hourly oscillators tend to support this view, since the two lower ones have already gone positive, and the higher one is already at the zero line.  But we’ll need some confirmation which should come as early as Monday morning.   
 

An overview of some important indexes (daily charts)

Last week I mentioned that IWM and TRAN had begun to assume the roles of market leaders.  It is therefore no surprise that we are seeing a market correction take hold. For the first time in a while, all the indices are pulling back from their highs in concert, although, to be sure, the degree varies greatly from the two leaders.  Nevertheless, this is telling us that, over the short to intermediate term, the bulls will no longer be on easy street.

UUP (dollar ETF)

UUP is consolidating its recent gain and is still expected to move higher over the near term.  This could change if it starts to trade below the horizontal dashed line.

GDX (ETF for gold)

GDX has concluded its rally in a downtrend which was fostered by the 6-wk cycle low.  It is succumbing, once again, to the louder sirens of the larger cycles due toward the end of the year.  While there could be some holding in this area, new lows are likely over the next few weeks.

USO (United States Oil Fund)

USO has now risen to the level of the resistance lines drawn on the chart, and will not find it so easy to continue its uninterrupted rise from the secondary test of its low.  Although the daily indicators appear ready to correct, the weeklies suggest that no real weakness is anticipated, and more strength could push the index to the former high of 12.00.  If, after some consolidation takes place between 11 and 12, USO is able to get to 12.50 or 13.00, it could be ready to move into the higher teens or even low 20s – over the longer term. 

Summary

The current correction in SPX is likely to continue a little longer and deeper.  It is also expected to be the last one before an intermediate top is struck. 

Andre

For a FREE 4-week trial, send an email to anvi1962@cableone.net, or go to www.marketurningpoints.com and click on "subscribe". There, you will also find subscription options, payment plans, weekly newsletters, and general information. By clicking on "Free Newsletter" you can get a preview of the latest newsletter which is normally posted on Sunday afternoon (unless it happens to be a 3-day weekend, in which case it could be posted on Monday).

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

© 2005-2018 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