Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Phase 1 of Stock Market Correction

Stock-Markets / Stock Markets 2019 Mar 11, 2019 - 05:16 PM GMT

By: Andre_Gratian

Stock-Markets

Current Position of the Market

SPX: Long-term trend – Is the long-term trend resuming? Is this a B-wave?  Too early to tell!

Intermediate trend – Initial rally has come 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

Phase 1 of Correction.

Market Overview

SPX Made an initial high at 2813 on 2/25, as did the other three major indexes followed in this letter.  On 3/04 it made a slightly higher top, as did NDX, but DJIA and IWM did not and, as all four started to pull back, it became evident that the market was struggling to remain afloat.  Even the last optimistic news reports about a positive resolution to the US-China trade situation could no longer keep it in an uptrend.   After a brief distribution period the long anticipated correction finally took hold. 

The first phase of the correction is likely over after a 94-point decline to 2722.  The 5X P&F chart had given a projection count to 2725-30, and this turned out to be spot on.  With the initial target met, a countertrend may already have started which should retrace about 50% of phase 1.  The odds of this taking place are reinforced by the P&F count taken at the 2530 level.  After this rebound is over and another small distribution pattern has formed, we should be ready for phase 2 of what could turn out to be a simple a-b-c correction.  The congestion pattern which formed between 2/25 and 3/06 may already given us an inkling of the extent of the entire retracement. After its completion, we will see if the index is able to resume its uptrend, or if more corrective action is required. 

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

SPX daily chart

The resistance band held, even though it was slightly exceeded -- but only on an intra-day basis.  The daily close did not make a new high!  Nevertheless, the fact that we did trade slightly above the previous 2815 high could be an indication that after this correction is over, we will surpass the current high of  2818.  An eventual kiss-back to the vicinity of the blue trend line which had its origin at 1810 in January 2016 would cannot be excluded.

I am a strong believer in price channels!  There are several on this chart, and one that I had mentioned on several occasions was the one which continued the rally from about the halfway point, but at a lesser angle.  I had mentioned before that going through the bottom of that channel would most likely start a correction, and the market was kind enough to oblige.  I have drawn another parallel to that channel from the 2346 low.  I think that there is a good possibility that the correction will at least continue until it reaches the bottom line of the wider channel. 

I had also mentioned that the end of the rally would be confirmed by all three indicators going into the red.  Once again, they followed the prescribed order of succession with the A/D (lowest) being first, followed by the SRSI (middle), and finally the CCI which did not become negative until last Thursday.  Now they will have to do it all in reverse to give us the next buy signal.  I suspect that this will take another good week and a half to two weeks to accomplish, at least. 

 

SPX hourly chart

Even though prices slowly gravitated toward the lower line of the initial (blue) channel in an apparent deceleration pattern which created the secondary (green) channel, it was not until they finally moved outside of the blue channel entirely that we had our first warning that a reversal was about to take place.  And it took a couple of weeks more before prices moved outside of the green channel, and the correction did start.  Prices tried to hold at the support level created by the top of the early February short-term top (red dashed line), but they were pushed lower on Friday morning when a poor jobs report was announced.  Even the support added by the 200-hr MA could not fend off the selling that took place Friday.  However, the extra push could not erase the positive divergence that had already appeared on the CCI and in the A/Ds by Thursday’s close, and by the end of Friday, the index had already started an oversold rally .  Actually, the term “oversold” is a misnomer since prices already knew where to go guided by the P&F count.  On Thursday, they were still short of that target.

It is not clear whether we keep going up right away on Monday.  The A/Ds were still negative at Friday’s close, as was the CCI.  The index was also still under the 200-hr MA which could offer temporary resistance, but the fact that we have already overcome the short-term downtrend line might be enough to bring in buyers first thing Monday.

DJIA, SPX, IWM, NDX (daily)

I think that it is fairly clear that we have started a correction.  All four indexes have turned down, although the amount of weakness in NDX makes that questionable for this index; but there is no question that its indicators have given a sell signal.  Since this is obviously the beginning of a correction, we need to give it time to define itself more clearly.  At the end of the week, there was nothing pointing to its end, and IWM was a little weaker than the others, so let’s take it a week at a time.

UUP (Dollar ETF) (daily)

After holding above its 50-DMA, UUP has now come within a few cents of its recent high.  Since it has gone to the top of its short-term channel, it could consolidate before attempting to move higher.  The fact that it did go as far as it could within the price channel shows a lack of deceleration, and therefore at least the possibility that it will try for a new high after a little pull-back.

 

GDX (Gold miners ETF) (daily)

After making a new short-term high which also reached to the top of its price channel, GDX displayed enough weakness to retrace the entire width of that broad channel.  It found obvious support on the trend line and is bouncing, but the extent of the correction over such a short period of time points to more than casual profit-taking.  The odds that it will move outside of its channel and extend its correction are pretty good, right now.

CGC (Canopy Growth) (daily) 

CGC continues to consolidate in what appears to be a triangle pattern.  If correct, it should now be ready to move out of it on the upside.  Further price deterioration would invalidate the triangle and suggest that another, longer consolidation pattern is in the making.  If it can continue to move higher as the market corrects, it would be further evidence of that group’s relative strength.

 

BNO (United States Brent Oil Fund) (daily)

BNO still looks as if it is getting ready to push a little higher before ending its rally.  It has good support at 18.00, and Friday’s action could be the start of the rally’s extension into the zone of resistance above.

Summary

After an impressive rally from its “bear market” low of 2346, SPX is finally ready to correct that advance.  Last week’s decline to 2725 probably ended the first phase of that correction, and the index may already have started a countertrend move to retrace part of that initial 94 point drop.  After a short rebound, one should look for an extension of the decline.  Let’s turn this over to the indicators and let them “indicate” when the correction is coming to an end. 

Andre

 FREE TRIAL SUBSCRIPTON

With a trial subscription, you will have access to the same information that is given to paid subscribers, but for a limited time period.  I think you will find that knowing how far a move can carry is one of the most useful benefits of this service, whether you are a trader or an investor -- especially when this price target is confirmed by reliable indicators which give advance warning of a market top or bottom.  Furthermore, cycle analysis adds the all- important time element to the above price projections. 

For a FREE 4-week trial, further subscription options, payment plans, and for general information, I encourage you to visit my website at www.marketurningpoints.com.

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