Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21
Dell S3220DGF Price CRASH to £305! 32 Inch 165hz Curved Gaming Monitor Amazon Bargain - 16th Jul 21
Google, Amazon and Netflix are Scrambling For This Rare Gas - 16th Jul 21
Sheffield Millhouses Park New Children's Play Area July 2021 Vs Old Play Area - Better or Worse? - 16th Jul 21
Inflation Soars, Powell Remains Unmoved. What about Gold? - 16th Jul 21
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why - 15th Jul 21
Tips For Finding The Right Influencers - 15th Jul 21
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? - 15th Jul 21
NASA And Big Tech Are Facing Off Over This Rare Gas - 15th Jul 21
Will the U.S. Dollar Lose Momentum In the Second Half of 2021? - 15th Jul 21
Bitcoin Stock to Flow Model Forecasts Infinity and Beyond! - 14th Jul 21
Proteomics: The Next Truly Massive Investing Opportunity - 14th Jul 21
Massive Solar Storm to Hit Earth 2025, Coronal Mass Ejection (CME) Danger and Protection Solutions - 14th Jul 21
Is This The Best Way To Play The Coming Helium Boom? - 14th Jul 21
Meet SuperMania and its Ever-Present Sidekick, SuperMeltdown - 14th Jul 21
How NFTs Are Shaking Up Arts Trading - 14th Jul 21
Gold: High Time to Move Out of the Penthouse - 13th Jul 21
Climb Aboard! Silver Should Run Up To $38 In Next 30 Days - 13th Jul 21
How Will Remote Work Impact the U.K. economy? - 13th Jul 21
Why Helium Stocks Are Set To Soar in 2021 - 13th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Tentative Rally to Undergo Short-term Correction

Stock-Markets / US Stock Markets May 19, 2008 - 07:18 AM GMT

By: Andre_Gratian

Stock-Markets

Best Financial Markets Analysis ArticleCurrent Position of the Market.

SPX: Long-term trend - Election years that fall in the 8th year of the Decennial pattern call for consolidation in the early part of the year followed by a strong finish. This is the pattern that the market has made so far this year. But the 6-yr cycle which is scheduled to bottom in late Summer/early Fall could play a restraining role, followed by an eventual bull market top in 2009-2010.

SPX: Intermediate trend - The intermediate correction came to an end on 3/17. The index is now in a cautious uptrend which is about to undergo a short-term consolidation.


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 determines 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 .

Overview:

The past two weeks have seen little change in the market behavior. The SPX has continued to edge up in a tentative manner, making new highs, nevertheless. Last Friday was options expiration and this may have helped the index to eke out a few more points on the upside which barely surpassed its high of two weeks ago. But both the chart pattern and the breadth figures on Friday suggest that we have arrived at a short-term top and that a consolidation is in the offing.

The cyclic configuration into the end of the month when the 20-wk cycle is due to make its low would agree with this scenario. But with longer cycles still in their uptrends, and the economic news reassuring investors that the worst may be behind us, the anticipated 2-wk decline should not have a major impact on the intermediate uptrend. What is more important to the market's fate is what happens after the first of June. This will give us some clues about the continued viability of the intermediate uptrend. I am still of the opinion that a pull-back into the Fall will occur before we can challenge the bull market highs.

One should note that the Dow Jones Industrials and S&P 100 did not make a new high last week, and that the banking and financial index are still lagging very badly. Also, sub-par breadth and volume are suggesting that the bullish sentiment is not universal.

What's ahead?

Chart pattern and momentum:

On the chart below, notice how the SPX is moving into a wedge pattern. This reflects the lack of upside momentum which normally results in a reversal. It is confirmed by the momentum oscillator which, after bouncing off its trend line, has moved back to overbought with slight negative divergence. But the A/D oscillator at the bottom of the chart is where the negative divergence is much more apparent . It has remained positive as the index has moved higher, but each small wave up has become weaker and weaker. This is a pattern which is very similar to the one going into the October 2007 high. This does not suggest that it will be followed by a similar decline, only that a reversal normally occurs when prices and breadth describe this type of pattern.

Note also that the index is reaching the top of its down channel where it should find at least some temporary resistance.

The rally from the mid-March low of 1257 is well-defined by a 3-point trend line. This trend line lies about 25 points below Friday's close and, when broken, will signal the beginning of the consolidation. The indicators carry similar trend lines which can be expected to be broken as well.

Cycles

Still no clear sign of the 9-mo cycle, so we'd better forget about it and move on. It is not unusual for this cycle to be a non-event. In late October 2006, it only caused a one-week decline before prices turned up again.

The next cycle of import here, is the 20-wk cycle and it is due to bottom towards the end of the month. Its impact has been varied in the past, depending on other factors which were present at the time it was making its low. Unless the 9-mo cycle is bottoming late and will add its pressure to that of the 20-wk, it does not look as if the pull-back will be that severe. Just a consolidation in an intermediate uptrend.

There is a minor cycle bottoming on Monday and a nest of cycles and CITs due about next Friday. The next Bradley turn date also falls on the 27th, adding to the probability that some sort of a short-term low should be made in that time frame.

Projections:

The last newsletter stated: There are 3 potential SPX projections to the upside for the end of the rally. The first was 1423 and was reached on Friday (5/1)... By reaching that level, the SPX had to go decisively beyond 1396, which it had resisted doing until last week. This triggers two other potential projections to higher levels: 1438 and 1470. At a maximum, if internals improve, the index could reach 1480 .

These upward projections are still valid, but not likely to be filled until we have a consolidation into the 20-wk cycle low. If the retracement alters these targets, I'll revise them later on. On the downside, 1360 looks about right for the decline into the end of the month. This presumes that the SPX will break below its 1385 low. It also assumes that the index made its high last Friday. If it goes a little higher before reversing, the projection will be somewhat altered.

Breadth

I could repeat exactly what I said in the last newsletter because very little has changed in the breadth pattern. The numbers reflect a lack of enthusiasm on the part of investors, with just enough issues participating to keep a not-very-dynamic uptrend in place. This leads me to believe that the uptrend is on borrowed time. That could change after the 20-wk cycle has made its low and it adds its upward pressure to the longer-term cycles instead of working against them.

For the short-term, whether you look at daily or hourly breadth, the figures show a diminishing lack of participation in advances over declines, especially since the beginning of the last upphase which started at 1385.

The volume has also become weaker and weaker as the uptrend has progressed. This is in synch with the pattern shown by the A/D over the past few weeks.

It is not a bullish scenario.

Market Leaders and Sentiment

The contrast between the NDX and GE has continued to expand. The former has kept on moving up, dragging the SPX behind it, while the latter has gone nowhere. Here are the daily charts of the three side by side. The NDX is the most bullish and GE the least. This is not the picture of a market which is "together". When you consider the poor breadth and volume patterns, and you look at this trio, you can see why many investors are saying: "I think I'll stay in cash for a little bit longer!".

Incidentally, the banking index is looking somewhat like GE, and the financial index continues to be one of the weaker indices. In a healthy market, these indices normally lead. They definitely are not, at this time.

As a sentiment index, the VIX is not always reliable in calling tops in a timely manner. For instance, in the Fall of 2006 and beginning of 2007, it remained at a very low reading for several months. But then, the stock market had just made its 4-yr cycle low. We are not in the same relative cyclical environment today. In fact we are only 4 or 5 months away from the bottoming of some long term cycles. So we should pay attention to the fact that the VIX is at a level comparable to October 2007 -- the high of the market. In "chart Pattern and Momentum" above, I mentioned that the daily A/D pattern (as reflected by its MACD) was also similar to the one which preceded the October top. In spite of this confirmation of potential market weakness ahead, I still do not think that we are facing the same kind of decline. At the October top, the market was long-term overbought and was facing a plethora of negative news ahead of it. Neither one of these conditions exist today. Still, caution is advised for the next couple of weeks.

Summary

There are ample technical signs that the SPX is getting ready for a short-term correction into the low of the 20-wk cycle which is expected at the end of the month.

The few weeks that follow that low will determine how much longer the intermediate trend will last before prices are pulled back down into the long-term cycles bottoming in the Fall.

The following are examples of unsolicited subscriber comments:

What is most impressive about your service is that you provide constant communication with your subscribers. I would highly recommend your service to traders. D.A.

Andre, you did it again! Like reading the book before watching the movie. B.F.

I would like to thank you so much for all your updates/newsletters. As I am mostly a short-term trader, your work has been so helpful to me as I know exactly when to get in and out of positions. I am so glad I decided to subscribe to Turning Points… Please rest assured that I shall continue to be with Turning Points for a long time to come. Thanks once again! D.P.

But don't take their word for it! Find out for yourself with a FREE 4-week trial. Send an email to ajg@cybertrails.com .

By Andre Gratian
MarketTurningPoints.com

A market advisory service should be evaluated on the basis of its forecasting accuracy and cost. At $25.00 per month, this service is probably the best all-around value. Two areas of analysis that are unmatched anywhere else -- cycles (from 2.5-wk to 18-years and longer) and accurate, coordinated Point & Figure and Fibonacci projections -- are combined with other methodologies to bring you weekly reports and frequent daily updates.

“By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint.” -- Mark Twain

You may also want to visit the Market Turning Points website to familiarize yourself with my philosophy and strategy.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