Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Want To Earn A Safe 5% In Fixed Income? Buy Preferred Stocks - 24th April 19
Can Gold Price Rise Without a Rate Cut?  - 24th April 19
Silver’s Next Big Move - 24th April 19
How Can a College Student Invest Wisely? - 24th April 19
Prepare For Unknown Stock Market Price Action As New Highs Are Reached - 23rd April 19
Silver Plays a Small but Vital Role in Every Portfolio - 23rd April 19
Forecasting 2020s : Two Recessions, Higher Taxes, and Japan-Like Flat Markets - 23rd April 19
Gold and Silver Give Traders Another Buying Opportunity - 23rd April 19
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market Seasonal Influence at Work

Stock-Markets / Stock Markets 2018 Oct 08, 2018 - 05:35 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 –  Correction in progress.

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

 Seasonal Influence at Work 

Market Overview 

It’s not always like clock-work, but the September-October period always deserves caution as we approach it.  This year, the beginning of the correction came a little late for the major indices, waiting until early October to get started and causing some to wonder if it would actually take place.  But the normal signs that we were nearing a corrective phase started to appear in early September when IWM issued a sell signal at the daily level, after SPX had reached an important projection target.  The primary indexes spent a little more time creating a top, with plenty of negative divergence showing in the daily indicators, and by the middle of last week, the preparation period was over and it was time to break some important trend lines.

By Friday, SPX had dropped 70 points to a strong support level, also filling a phase target to 2870.  With divergence appearing in the hourly indicators, it was time for a rally to start, and it is possible that we have already completed the initial a-wave of the decline and started on the b-wave.  That seems to fit both the position on the daily indicators which need more work before they are ready to signal a buy, as well as the distribution phase created at the 2920 level, which is only partially exhausted, and which calls for lower prices before the downtrend is over.  From a time perspective, another week or ten days may be required for the market to steady itself and be ready to resume its uptrend. 

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

SPX daily chart

If you were watching the decline on a 5m chart as it was taking place, it looked serious!  But as you can see on a daily chart, it’s not a big deal.  I have numbered the trend lines which the index must break before we start being really concerned.  It starts with the one which originates at the 1810 level, the point from which the second phase of the 2009 bull market started, and even accelerated.  When we get to the end of that phase, it will not be the end of the entire bull market, but there should be a correction – perhaps from the ~3000 level -- far more severe than the one presently underway. 

So far, only trend line 4  has been broken, and prices have dropped to trend line 3 which has a  very good chance of being broken as well. But the correction, at best, should be limited to the dashed line which is a parallel of the dashed line connecting the tops.  These two lines represent the channel in which our current wave 5 from the 5/03 low is traveling.  Only when that lower channel line is broken, and we are on our way to challenge trend line 2 and then 1, should we be certain that a much deeper correction has started that could retrace the entire uptrend from the February low.  Since we will most likely make a new high after this correction is over, it is not yet time to panic!

In the last two days, SPX has retraced all progress it made above the January top of 2872, and it’s no wonder that this is where Friday’s decline found support, especially since trend line 3 is just below, and this is also the current level of the blue 50-dma.  As stated above, the rebound which started on Friday is probably only a downtrend rally, or the b-wave of the current correction.  Except for the SRSI which cannot go any lower, the other two oscillators have yet to turn and we will most likely have to wait for them to show positive divergence before we are ready to put an end to the entire decline. 
      

SPX hourly chart

Although the selling which started Thursday continued into Friday, it was fairly obvious that it was coming to an end -- and where it would come to an end!  About mid-day, SPX met a phase projection of 2970 which was very close to the level of the 2872 top of January (dashed red line), and just a few points from the next important trend line.  At the same time, the CCI and the A/Ds were developing strong positive divergence and turned up as soon as the index began to rally from the combined target and support levels.  By the end of the day, the index had recovered half of its daily loss, with the rebound stopping right at the downtrend line. 

I am showing the .382 (2896) and .50 (2904) Fibonacci retracement levels of the three-day decline.  It is always a good thing to mark those areas on the chart after each rally or decline, since it is frequently the levels reached by the countertrend move.  Note that in this case, the .50 level of 2904 is precisely the area of resistance created by a former low.  It’s a price level worth noting for a potential end to the b-wave.

DJIA, SPX, NDX, IWM (daily)

The reason for comparing the relative performance of these four indexes was made abundantly clear in the past couple of weeks.  The pink asterik marks the date when IWM made its high and started to decline.  Only NDX peaked at the same time, but it did pick itself up to rally to a slightly new high when remaining strength in DJIA and SPX drove them higher.  IWM was not phased by this display of strength in the other three.  It rallied a few points and immediately fell out of bed when SPX broke its trend line.

This is one of the best advance warnings given by this index. 

UUP (dollar ETF) weekly

UUP has had the rally that was anticipated but it does not look quite finished.  For one thing, it has only reached 25.49 and must reach at least 25.50 or better.  The small increment makes all the difference in the world on the P&F chart.  Considering the chart pattern, it is not likely to stop exactly at that price, but may push a little closer to its previous top.

GDX (Gold miners ETF) weekly

GDX has been waiting for UUP to reverse in order to make another stab at recovering.  Since it may have to wait a little longer, it’s likely that it will not stay at the current level, but pull back one more time to about 18.00(?).  Only after UUP reverses will GDX be able to move higher.  Since getting past the blue 50-dma line will be a prerequisite to give a buy signal, that’s where we should be keeping our attention.

USO (United States Oil Fund)

USO did not wait around very long at its lower channel line, but quickly showed signs that it was ready to extend its uptrend.  After a little conslidation, it should peak etween 17.00-17.50.

Summary

SPX has started a consolidation which has completed its initial a-phase and is retracing a portion of its decline as a b-wave.  When this is finished, I would expect to see a new low before the corrective move is over and the index is able to resume its uptrend to new highs.  ~3000 remains the preferred price level for the final top before a much more serious correction begins.

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