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
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Challenging Recent High

Stock-Markets / Stock Markets 2018 Aug 19, 2018 - 05:40 PM GMT

By: Andre_Gratian

Stock-Markets

Current Position of the Market

SPX: Long-term trend – The bull market is continuing with a top expected in the low 3000s.
 
Intermediate trend –  A new correction has started.  More time is needed to determine its extent and duration.
 
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

Challenging Recent High 

Market Overview 

Last week, SPX filled the count established at the 2860 level by dropping to 2802, formed a small base, and rallied strongly on the news that there appeared to be a détente in the potential trade war between the US and China.  Should these prove to be false expectations, the market will most likely react by reversing its short-term direction once again.  From a purely technical basis, the count provided by the small accumulation base after the 2802 low has been filled to the extreme, and it is logical to expect a pull-back before re-testing the 2860 high.  We need to see how much of a pull-back we get, and observe the market action afterwards to determine if we are indeed ready to surpass the current high, or if a deeper and larger retracement will be needed before doing so.  Next week should help to clarify the market’s current position.

It might be noteworthy to point out that, for the second short-term correction in a row, SPX failed to retrace .382 of its previous rally.  Is this the sign of a strong market, of one which is overbought and needs more correcting?  Last week, I pointed out that DJIA was a laggard compared to other principal indexes but it just gave a strong performance.  Since AAPL has become part of the DOW, the latter has become more volatile, and AAPL was exceptionally strong in this rally -- and so was the DOW.  NDX was a laggard, but IWM will be the one to watch.  It has been consolidating since the beginning of July and has established a large congestion pattern.   If it breaks out on the upside, it should lead the market higher.  On the other hand, a decline from here could lead to an extended correction.

Chart analysis  (The charts that are shown below are courtesy of QCharts)

SPX daily chart

For the time being, SPX is ranging between the former high and the 2800 level, establishing strong support which would signal a larger and deeper correction if broken.  But currently, our focus should be more on whether or not this index is on its way to making a new high.  Two weeks ago, it came within less than 10 points of doing so. This week, it is trying again but has exhausted its current short-term potential to the upside.  It will therefore require some retracement to eliminate the near-term overbought condition and create another launching platform for its next try.  Next week should therefore be a period of preparation for another assault. 

Since we should have another pull-back over the next few days, the daily indicators could easily turn negative again.  But instead of putting all of our attention on this index, let’s keep an eye on IWM which has led the market in both directions lately and should continue to do so.  It closed the week at 168.35 and a move past 170 would have bullish implications for the rest of the market.  We’ll also have to keep another eye (?) on NDX and DJIA, since both of these have a direct influence on SPX.  I just took a look at AAPL which seems to be very overbought with negative divergence in its daily indicators -- a warning that it may be ready for a pull-back and take DJIA with it.

SPX hourly chart

As you can see, at the last low (2802) SPX did not have the time to create a very large base before the next news-driven rally started.  It is likely that traders had advance notice and reacted immediately.  Still, when translated to a P&F chart, there was enough of a count in that base to take it as high as it went on Friday.  Meaning that we should start a correction right away or after a throw-over of a couple more points.  It would be very unorthodox for the index to draw additional count from the pattern that formed just above the 2820 level so that it could push higher before correcting; but if there is more bullish news over the week-end, this is what could happen. 

The oscillator pattern strongly suggests that what we already have is all we get for now.  Double divergence has formed on the top oscillator (CCI) and this, under normal circumstances, suggests that a correction is about to start.  After it gets under way, we can try to establish a projection for the extent of the retracement. 

SPX, NDX, IWM (daily)

We are looking at the charts that we analyzed earlier.  SPX was the strongest performer last week, but should now correct.  IWM had a pull-back equivalent to that of SPX, but did not rally as strongly, stopping a little short of its last top while SPX exceeded it.  NDX’s decline was curtailed when it found support on a trend line, resulting in a more shallow retracement than the other two.  This relative strength in NDX should have led to an immediate challenge of its former high, but instead, it had the weakest rally of the three.  That probably makes it more vunerable in the coming reversal since it is not ikely to hold again above the trend line.  In any case, it had already established enough distribution to correct down to 7210.  If it breaks its trend line, it could come down to that level in the next correction.  If DJIA also corrects sharply along with a correction in AAPL, this will be a double whammy for SPX.  So, the week ahead could be interesting.

 

UUP (dollar ETF) daily

After surging to its P&F target of 25.50 (+ a few pennies), UUP is now starting to correct.  Until it shows some real weakness it may still go a little higher, and it would have to decline below its trend line to begin a move down to the 24.80 support.

GDX (Gold miners ETF)

GDX has dropped to the bottom of a broad declining channel where it is beginning to find support.  It is probably not a coincidence that this weakness corresponds to the time frame when the 65-wk cycle was due to make its low.  Nor need this be the final low since there is the potential for a point or so lower.  Friday marked the first up-day after a drop of about 20% without a single rally or even consolidation.  Surely, the index is entitled to an oversold bounce.  Even a minimum Fib retracement of .235 would bring it back to about 19.50.  Eventually, a retracement of 50% would return it to the level of the broken support which is now resistance.    

USO (United States Oil Fund)

USO has started its correction after reaching its 15+ target, and dropped to 13.50 last week before bouncing.  It will probably have to get down to about 13.00 before it starts to consolidate in anticipation of continuing its longer-term uptrend.

Summary

Last week, SPX corrected down to 2802, filling the count of the distribution pattern established at 28.60, and rallied back to 2855 which should be about all we get for now.  Divergence at the hourly level also suggests that we are ready for a near-term reversal.   Next week’s action should determine whether or not we are ready to challenge the high at this time.  If we are not, some extended and perhaps deeper correction may be required before we do.    

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

© 2005-2019 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