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
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Correction Turns Consolidation

Stock-Markets / Stock Markets 2018 Apr 23, 2018 - 09:37 AM 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 – The intermediate correction from 2873 should now continue until May.

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

Correction Turns Consolidation

Market Overview   

Last week, I outlined what could be a bearish end to the correction based on cyclical pressure and congestion at the 2760 level, but cautioned that it would have to be confirmed by the market action over the next few trading days.  It did not take long for SPX to strike down that possible scenario as prices immediately rose above the 2670 resistance level and moved up to 2717 before reversing.  It appears that I gave the 40-wk cycle bottoming in the next few weeks too much credit for the amount of downside pressure it had in store. 

Conversely, it may not permit the index to exceed last week’s high before there is a retest of the recent lows.  It has been suggested that SPX is morphing into a triangle formation which would be the launching platform for the final bull market high in the Fall, most likely in the low 3000s.  This is what the 1810 congestive formation had suggested all along.  This would also satisfy the larger structure with a wave 4 triangle before wave a 5 into the bull market top.

Near-term, the minor low of 2661 which was made on Friday could bring a brief rebound next week, but with the larger cycle bottom now in sight, we should not expect too much of an uptrend before the decline resumes.. 

 Chart Analysis  (These charts and subsequent ones courtesy of QCharts)

SPX daily chart

The 200 DMA and the intermediate trend line no longer coincide because I have readjusted the latter to the second low.  For now, the structure remains A-B-C until we see how the rest of the correction proceeds.  However, with large price swings subsiding, the rest of the correction should become a consolidation confined to the already established parameters.  This would most likely convert the final structure into a triangle formation; but since other possibilities still exist, let’s wait until the correction has ended. 

The rally from 2554 remained sluggish until it reached the 2670 resistance level, then picked up momentum as it broke through and quickly reached the declining 55-DMA which, although it was slightly surpassed, brought an end to the move.  In the last three days, the index lost nearly 60 points, so there is still plenty of volatility remaining in the market.  The decline has brought prices back to the break-out point, as well as the trend line, drawn from the 2553 low.  This should provide some temporary support, but any rebound from here should be limited by the 40-wk cycle low which is rapidly approaching.  The rally from 2554 failed to make it all the way to the primary downtrend line, and this is a sign that the bears are still in control, but only up to a point.  They control the highs, but the bulls control the lows and that gap is narrowing.  It is the reason why the correction is likely to end as a triangle formation, which is often the shape taken by a wave 4.  

SPX hourly chart

After reaching overhead resistance at 2717, SPX could go no higher and reversed even though it had a potential count to 2720.  That, and its failure to make it all the way up to the principal red downtrend line, can be construed as a sign of weakness.  Also, in the ensuing decline, a minor cycle due on Thursday might already have failed since after three hours of consolidation, the decline continued down to the trend line from 2554 which was breached but held, producing a small rally in Friday’s last hour of trading. 

The weakness after the reversal from 2717 can be seen in the top oscillator which dipped lower than at any time since the beginning of April; but by Friday’s close, some minor positive divergence did develop in the indicator, suggesting that the index could hold for a little while above its support level (the top portion of which has already been penetrated).  SPX would now have to rally nearly sixty points just to challenge the 2717 level.  I am not sure there is that much bullish strength left since we are so close to the cycle low.  A continuation of the decline could find at least temporary support on one of the red lines below.

Beginning to form a base for more than a few days after we enter the month of May could be indicative that we are preparing to reverse and start on our final leg of the bull market. 

 

TRAN, SPX, IWM (daily charts)

Last week, TRAN was the weakest of the three above.  This week, it has rallied to the top of its corrective formation and if all three make a triangular pattern as they complete their correction, TRAN may end up with an ascending triangle formation and be the first to move higher.  Since both TRAN and IWM are holding better than SPX, we can probably assume that the correction is nearly over; but it is likely that all three indexes need one more – and final – retracement before starting their next bullish trend.

 

UUP (dollar ETF)

UUP has broken above its downtrend line, but I doubt if it is the beginning of a new uptrend.  Instead, it may be ending wave 4 of the correction from the 24.75 top before starting 5 of 5 of the correction which started at 26.83.  Very often, wave 4 trades outside of the trend line connecting the high and the top of wave 2 before starting on wave 5.  This could be what UUP is experiencing.

GDX (Gold miners ETF)

As long as strength remains in the dollar, it is unlikely that GDX will be able to achieve a real break-out.   It has been stopped in its attempt to move to the 25-25.50 projection level by resistance encountered at a former short-term high, and it may have to wait until UUP starts on its final down phase before it can get the all clear signal.

 

USO (United States Oil Fund)

You could not ask for a more perfect structural pattern than the one formed by USO’s uptrend from its major low, especially since, by printing 14.00, it has now reached the minimum target zone for this move.  Another half-point or so is possible before ending the entire uptrend from 8.65.

Summary  

SPX is nearing the time frame when the 40-wk cycle is scheduled to make its low.  Prices are being squeezed more and more into a narrow range as sellers and buyers continue to define the limits of the remaining trading zone.  This could result in the correction ending after having formed a large triangle which is often what structure dictates for a wave 4 pattern. 

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