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
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Stock Market New Low in Store?

Stock-Markets / Stock Markets 2018 Nov 25, 2018 - 03:53 PM GMT

By: Andre_Gratian


Current Position of the Market

SPX: Long-term trend – Bullish, but correcting within the long-term bull market trend.

Intermediate trend –  bearish correction which could retrace as low as 2200 before it is complete

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

 New low in store?

Market Overview 

Last week, SPX declined over 100 points to a new closing low and is ready to challenge its intra-day low of 2604.  DJIA matched it with a loss of 1127 points for the week.  But NDX was the worst performer, dropping 340 points for a new correction low.  SPX is approaching a support level just above the former low of 2604.  Perhaps for this reason, or because of the Thanksgiving holiday, breadth was relatively bullish in the last couple of days.  Does that mean that it will hold in this area before staging a good rally?

If selling continues into next week, it will amount to a change of structure with a new low for the A wave (SPX 2545?) before we get the B wave rally.  Should this be the case, we are looking at a more protracted bear market in terms of both time and price than was originally estimated.  We’ll take another look at the SPX weekly chart to show that a decline of 700+ points is actually the most logical estimate that we can contemplate.  

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

SPX weekly chart

There is a debate (as always) about how long and deep this correction will be.  The main purpose of displaying the chart below is to arrive at a potential target for the proposed evolving bear market.  With the assist of Elliott Wave theorists, I have labeled the 2941 high of  9/16/18 as the top of wave 3 of the uptrend which started in March of 2009. That wave had its start at 1011 in June 2010 and traveled 1930 points before coming to an end.  Since it is normal for a correction to retrace anywhere from .382 to .618 of the previous wave, the minimum retracement we could expect from this uptrend should be down to about 2204, as shown on the chart.  This retracement would measure 737 points, and it would correspond to a good support level, as you can see on the chart.  But there is even better support below at the 2015 high of 2135, and since .382 is, after all, normally a minimum degree of retracement, it is not inconceivable that the expected bear market would end up measuring a little over 800 points before it is complete. 

There is another factor which tends to support a potential retracement into that price area.  It has to do with the wave which started at 1810 and concluded at 2941.  This is the uptrend that I had originally considered when looking for a correction potential.  In this case, a .618 correction of that distance would take the index back down to about 2240, which is a close match for the .382 retracement of the entire wave 3. 

Of course, we must first break substantially below the February low of  2533  before we can say that we have started a major correction.  If the projection presented in the Market Overview is correct, it may be a while before we can do this since we would first come close (2545) but remain above, have a substantial rally, and only then be in a position to break below that February low.  This could take well into the new year to accomplish


SPX daily chart 

Originally, it was thought that the low of 2604 was the low of Wave A, as there is a clear a-b-c retracement to that level.  But the continued weakness beyond 2671 suggests that corrective wave A has not yet made its low, and is likely to extend beyond 2604.  The bottom trend line of the lateral channel is providing good support just above 2600, so we will have to see whether the index can hold that level.  Last week’s market performance, which included a close at the week’s low, does not hold the promise that it will.  If not, a logical low for A would be around 2545.

After A completes, we should start on B, which has the potential of reaching back to the vicinity of 1815.  And then, we’ll have to deal with C!  Those who favor a short and shallow correction believe that the completion of wave C will signal the end of the bear market.  However, if the “logical” projections that were presented on the weekly chart (above) have any value, it’s unlikely that a completion of wave C would come anywhere near the levels discussed.  The truth of the matter is that we can only make an educated guess based on historical precedents, as to how this correction will unfold and when it will come to an end.  What we can do is to follow it closely and see if it continues to match our assumptions.  If not, then we must look for a different scenario. 

There is nothing in the indicators that suggests that the correction from 2815 is over.  Based on P&F/Fibonacci, there are two targets that stand out:  2585-2570, and 2545. 


SPX hourly chart

The hourly chart also looks negative.  After losing 17 points in Friday’s shortened session, SPX closed on the low of the day and appears ready to challenge the band of support that lies just above 2600.  It’s the last obstacle standing between the former low and a potential extension down to 2545 to complete the A wave.  Although there is some mild positive divergence in the indicators, it could be quickly erased by a drop below 2600.  Monday’s action should throw some light on what the index will do over the short-term. 

Encouraging news for the bulls – at least temporarily -- is that, from wherever this decline makes its low, there should be a good rally (in fhe form of wave B) which will retrace a good portion of the entire decline from  2941. 

DJIA, SPX, IWM, NDX (daily)

There has been a change in the relative order of weakness with NDX outdoing IWM as the worst performer since the correction started.  It also seems as if DJIA, which clearly outperformed the other three, has caught up with them and no longer stands out.  The first sign that weakness is subsiding will be when the bottom indicator (SRSI) in all four indexes turns up with the two lines crossing.  Then, when the top oscillator (CCI) becomes green, we should at least be back in a short-term uptrend.   Watch for IWM to take the lead!

UUP (dollar ETF) daily

After a brief and shallow correction, UUP has resumed its uptrend and made a new high.  As long as the price remains above the green 34-MA, the uptrend should continue.  Even if it breaks below, the index should not suffer a very deep correction until it starts to trade outside of its lower channel line.

GDX (Gold miners ETF) daily

GDX made an attempt at breaking out of its short-term downtrend, but Friday’s deep pull-back does not bode well for a rally extension.  The index continues to be at the mercy of UUP and, as long as the latter does not begin a significant retracement, sustained strength cannot be expected of GDX.  With two important cycles scheduled to make their lows around the first of the year, GDX may have to wait until they bottom to start a good uptrend.

USO (United States Oil Fund) daily

USO has retraced about seventy-five percent of its advance in a fraction of the time that it took to complete it.  Although it may finally find support in this area, it should not be expected to turn on a dime, but rather to spend some time building a base.


SPX is making a structural change in the first leg of its correction.  Instead of having ended its A wave at 2604, it now looks as if it will not complete it until (based on P&F/Fibonacci projections) it declines down to about 2545.  Only then, will it be ready to start on the B wave.  However, if normal corrective parameters prevail, it will take more than a simple A-B-C structure to complete the intermediate decline which started from 2941.


For a FREE 4-week trial, send an email to, or go to 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 - 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