Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
S&P 500 at Resistance Level, Downward Correction Ahead? - 17th Jan 19
Mauldin: My 2019 Economic Outlook - 17th Jan 19
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

Will Stock Market Support Hold?

Stock-Markets / Stock Markets 2018 Sep 10, 2018 - 01:16 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 –  Another correction has started which could conceivably continue into mid-October.
 
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

Will Support Hold? 

Market Overview 

Last week was marked by a sharp correction in NDX, while DJIA held up well.  SPX, which is a kind of hybrid of the two, logged in six consecutive days of decline spanning a total of almost 50 points.  The last two days entered a zone of support which ranges from 2854 to 2873, but since the index closed the week at 2872, no serious technical damage has yet been done.

Both SPX and NDX have so far, built congestion zones which could serve as bases capable of sending them to retest their recent highs, if this is where this phase of the correction ends.  After that the correction should extend into mid-October which is both the anticipated low of the next 20-week cycle, as well as a notoriously weak period for stock prices. 

Furthermore, the period of comments and objections regarding the decision to impose an additional $200 billion in tariffs on China concluded last week with Trump re-asserting that he intended to do just that;  but there are normally two to three weeks of evaluation before that decision is finalized.  This could be the catalyst which causes the correction to continue into mid-October. 

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

SPX daily chart

The support zone under the current SPX price is outlined in dashed red parallels.  So far, the index has only scratched the surface, but if it moves deeper right away it will encounter even more support in the form of a trend line as well as the (green) 30-dma.  The target for this phase of the correction was gauged at 2860-2855.  There is, therefore, a little more room for the decline to come to a temporary rest on the bottom of the support level, but doing so would alter the congestion pattern as well as the count suggesting a retest of the highs.

If I am right about this correction lasting into mid-October we should probably expect an a-b-c pattern with the a-wave concluding at about 2855. The b-wave would start as soon as the short-term downtrend line is broken, and the c-wave could take prices at least down to the next (more) important trend line.  We can get a better idea of the ultimate downside projection if another phase of distribution has formed representing the top of the b-wave, and after a c-wave has begun to manifest itself.  The rationale for a corrective move being underway is that longer-term projections point to a target in the low 3000s before the bull market ends.

All the oscillators are declining and the two lower ones have already given a sell signal; the third one must become red to confirm that more than a short-term correction is in play.  Next week should give us more information. 

SPX hourly chart

It would be difficult to find a more orderly correction pattern.  It is made up of small declines followed by small rallies taking place within a larger channel delineated by the two heavy trend lines.  The bottom channel line starts at 2594 which is the low of the wave 4 correction in early May, and connects with the late June low of 2692.  With this trend line currently running a little lower than 2820, a wave-a low of about 2855 would remain well above it.  But if we are destined to have an a-b-c correction into mid-October, it is not unconceivable that the c-wave could drop down to that lower channel line -- and perhaps even outside of it -- as the overall advance shows a normal deceleration phase before going for the final top. 

The oscillators reflect the corrective pattern with the SRSI oscillating with each short wave, while the CCI remains negative and the A/Ds stay primarily in the red.  All three should become positive as we start on the assumed b-wave.  There is a good possibility that we could end wave-a around 2855 by the middle of the week. 

SPX, NDX, DJIA,IWM (daily)

The index charts comparison shows that DJIA was the first to make a new high, followed one day later by IWM.  Keep in mind however, that for DJIA that was only a recovery high, since it is still some 700 points below its January top.  For IWM, it was a new all-time high.  SPX followed it a day later, but it took NDX a whole week to catch up, and catch up it did, with a strong rally.  But even after NDX made a powerful breakout, I became suspicious of this move’s carrying power because IWM was struggling to follow through.  So, true to its reputation as a leader, it did signal a new high, as well as the end of the rally by its refusal to move ahead aggressively, even though it had forged a strong base pattern which pointed to higher highs on its P&F chart. 

Now, NDX has become the weakest index as heavy profit-taking has hit the tech complex.  The SRSI of all four indices show no sign that the decline is over,  confirming what the top distribution pattern is saying:  we should still have another 15 points or so to go before we arrive at the low of wave-a.

 

UUP (dollar ETF) weekly

UUP found initial support just above 25.00 before bouncing.  Best guesstimate is that it will first touch 25.00 before additional distribution takes place above that level.

GDX (Gold miners ETF) weekly 

If the next tariffs implementation is delayed by two or three weeks, it would allow GDX to bounce from its low as it continues to construct a P&F base capable of supporting a meaningful rally.

USO (United States Oil Fund)

I believe that USO is engaged in a consolidation/correction which will take it to 13.50-13.00 before it is over.

Summary

SPX has started a correction which could last into mid-October.

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