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Stock Market Close to Major Turning Point

Stock-Markets / Stocks Bear Market Sep 29, 2009 - 10:31 AM GMT

By: David_Petch

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleThe daily chart of the Gold miners bullish percentage index (BPGDM) is shown below, with the HUI shown in green. In the past whenever the BPGDM reached 85 or higher, it was often associated with a top. At present the BPGDM has declined from 87 to 67, with an accompanying decline in the HUI. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in stochastics 1 and 2. Based upon extrapolation of the trend, the potential downside could last for 3-4 weeks. Expect continued weakness in the gold stocks.


Figure 1

The daily chart of the CBOE options equity put/call ratio with the S&P 500 index shown in black. The ratio broke out of a near 3 month triangle, suggestive that further downside is likely. A full stochastic is shown below…it is important to note that for this particular chart, the %K above the %D is a sign of general weakness in the broad stock market indices, while beneath the %D is a sign of strength (all other charts having the %K above the %D is a sign of stock market strength). At present, the %K is above the %D, indicating general weakness in the broad stock market indices for at least the next 2-4 weeks.

Figure 2

The daily chart of the S&P 500 index is shown below, with upper and lower 21 and 34 MA Bollinger bands in close proximity to each other, suggestive that a breakout to the upside or downside is possible (most likely to the downside). The lower 55 MA BB curled up in late August, suggestive that a top was put in place. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in all three instances…notice however that the %K in stochastics 2 and 3 have curled down, strongly suggestive that a top was put in place. Based upon extrapolation of the trend, expect weakness in the S&P 500 index for at least 2-4 weeks. Those wishing to go short should take precautions with tight stops. I am going to be updating the Horizon Beta funds, also looking to add an S&P equivalent long and short fund.

Figure 3

The weekly chart of the S&P 500 index is shown below, with upper 21 and 34 MA Bollinger bands above the index, suggestive that a top was put in place. Notice the lower 34 MA Bollinger band starting to curl up, suggestive that a top was put in place. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in all three instances. Notice the %K in stochastic 1 appears to have curled over, suggestive that a top is in place or looming. The %K in stochastic 2 has yet to roll over to confirm a longer-tern downward trend but based upon Figures 2 and 3, expect weakness over the next two weeks.

Figure 4

The monthly chart of the S&P 500 index is shown below, with all three lower Bollinger bands beneath the index, suggestive the March 2009 lows will hold. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in 2 and 3. Based upon extrapolation of the trend, a bottom is not likely to be put in place (double bottom or higher low) for at least 12-18 months.

Figure 5

The mid-term Elliott Wave count of the S&P 500 index is shown below, with the thought pattern forming shown in green. The S&P did not rise as expected last week, but a decline to around 900-920 should occur during the last 10 days of October. At present wave (c) is either complete or wave (d) down is underway…this structure is likely a neutral triangle that would see market support above 900 until sometime in December/early 2010. So, the trend should for the next 7-10 days should be down, followed by a brief bounce with weakness into late October.

Figure 6

The long-term Elliott Wave count of the S&P 500 index is shown below, with the thought pattern forming back in March denoted in green. The S&P went higher than initially thought, but is close to the turning point predicted. As mentioned in Figure 6, it is highly probable that weakness occurs into late October, followed by a short-term bounce into late November/early December before declining for a 4-6 month period.

Figure 7

That is all for now…I will update the Horizon Beta funds early tomorrow AM and post an update of gold in the evening. Have a great day and enjoy the last few nice days of summer???  before fall really sets in

By David Petch

http://www.treasurechests.info

I generally try to write at least one editorial per week, although typically not as long as this one. At www.treasurechests.info , once per week (with updates if required), I track the Amex Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10 Year US Treasury Index and the S&P 500 Index using various forms of technical analysis, including Elliott Wave. Captain Hook the site proprietor writes 2-3 articles per week on the “big picture” by tying in recent market action with numerous index ratios, money supply, COT positions etc. We also cover some 60 plus stocks in the precious metals, energy and base metals categories (with a focus on stocks around our provinces).

With the above being just one example of how we go about identifying value for investors, if this is the kind of analysis you are looking for we invite you to visit our site and discover more about how our service can further aid in achieving your financial goals. In this regard, whether it's top down macro-analysis designed to assist in opinion shaping and investment policy, or analysis on specific opportunities in the precious metals and energy sectors believed to possess exceptional value, like mindedly at Treasure Chests we in turn strive to provide the best value possible. So again, pay us a visit and discover why a small investment on your part could pay you handsome rewards in the not too distant future.

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Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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