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
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Ready to Rally

Stock-Markets / Stock Markets 2011 Dec 19, 2011 - 04:00 AM GMT

By: Andre_Gratian

Stock-Markets

Best Financial Markets Analysis ArticleSPX: Very Long-term trend - The very-long-term cycles are down and, if they make their lows when expected, there will be another steep and prolonged decline into 2014.

SPX: Intermediate trend - The current action suggests that a wave "C" from 1075 is underway and, after a short consolidation, is about to resume its uptrend.


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.

Market Overview

Last week, the headline was: "A LITTLE MORE CONSOLIDATION?", which turned out to be correct with the SPX losing another 45 points before finding support.

What now? Last week's prediction was predicated on cycles bottoming early next week. These cycles exerted steady pressure during the beginning of the week, but by Thursday, the SPX was starting to resist the downtrend, and this was the case on Friday as well. One reason for this action was the fact that the P&F chart had given a phase count to 1212. On Thursday, the SPX found support just below the projection target at 1210, re-tested it, and held above that level for the rest of the week.

Although this may suggest that a correction low has been made, what is more likely is that the total distribution phase count to about 1205 will be met, with the possibility of a further decline to 1195. Since cycles are due to bottom early next week, this makes more sense than forming a base above 1210.

Should this take place, the market would then be in a position to extend the wave "C" rally which started at 1159. It may have only a limited time window to do so. According to Raymond Merriman, the renown financial astrologer, astrological signs will become unfavorable to the stock market by the end of the month. Since the SPX will have to travel 90 to 100 points just to get to the former 1292 high, if he is right, it will be a challenge to do so in such a short amount of time.

On the other hand, astrology aside, the technical picture of the SPX looks favorable. As you will see on the chart, the index may be in the process of making a significant inverted Head & Shoulders pattern which would be confirmed if it can rise above 1267. Next week, if the base pattern is complete and the SPX has reversed, we can gauge by the size of the base how far the rally can travel. Previous projections have suggested about 1314, and even higher. That will be confirmed (or not) by the base pattern which is currently under construction. At this point, it looks as if the SPX will have to hold off reversing until about the middle of next week so that the accumulation pattern can be extended enough to confirm the former projections.

Chart analysis

Let's look at the market position as of Friday's close to see where we stand technically. Since we are trying to de-cypher what will take place over the next few days, we'll start with the Hourly Chart which is the crystal ball better suited for this time frame.

I have drawn all the important support and resistance lines, channels, etc... and will discuss each one and its relevance to the current trend. Starting with the longer-term trend, there is a (red) declining trend line from the 1356 high and drawn across the 1292 top which stopped the rally from 1159, and which is now the make-or-break trend line for the coming rally. If the uptrend which is about to start cannot rise above this trend line, the concept of wave "C" could be in serious trouble.

Even if SPX does make it through the declining trend line, it will face more formidable resistance a little higher.

Before going into that, let's bring our attention to the various up-channels. There are two main ones which encompass the intermediate uptrend, the (purple) main channel, and the (green) secondary channel. The secondary channel has provided support for the 1159 low and, more recently, its (dashed) parallel has provided temporary support for the current decline from 1267. Since we expect a slightly lower low, it will most likely be broken and prices may find support on the next lower parallel. But this is not what concerns us right now. The red (dashed) trend line above the price pattern is also a parallel to the secondary channel, and it acted as a support line before the decline to 1159, as well as a resistance line for the rally from that level.

The point that I am making is that, even if the SPX can overcome the (red) declining trend line from 1356 to 1292, it will immediately find more resistance just a few points higher, and the level where that up-trending, red-dashed line meets the dashed line drawn across the 1292 top will be practically impossible to penetrate without further consolidation. This does not bode well for the rally extending all the way to the 1314 projection. On the other hand, if the SPX can cut through all this overhead resistance without pausing, it will be a sign that we have a strong market on our hands!

Now, let's shift our attention to the short-term trend from 1267. Here, the trend is in a tight declining (purple) channel. At first glance, it's obvious that we are not quite ready to reverse. Within the purple channel, there is a steeper channel. For the first time since the decline started, the index challenged that secondary channel, but was pushed back before it even came close to the top purple downtrend line. Also, the fact that prices traveled all the way down to the lower purple line is a sign that the decline lacks the deceleration pattern which precedes a reversal. The rally from Thursday, was only an oversold rally from a decline to the 1212 projection. In that process, the indicators became overbought and will have to move back to the bottom again as prices find their final price objective. This may take more than one or two days.

Let's now take a brief look at the Daily Chart to see how all this looks on that time scale.

Because prices are compressed on this chart, making a new high above 1292 does not look as formidable as it did on the hourly chart. Furthermore, there is an inverse H&S pattern which appears to be forming on the index. In order to confirm it, the SPX will have to rise above 1267, which is above the red downtrend line from 1356. Will the Santa Rally have enough oomph to do that? The next couple of weeks promise to be very interesting.

Cycles

The main cycle keeping prices down until next week is the 11-wk cycle. That's all that comes to mind for the rest of the year. I will discuss those bottoming in January in the next letter.

Breadth

The Summation Index (courtesy StockCharts.com) resumed its downtrend along with the 10-day correction and made a new low. This may not have any immediate repercussion on the market, but it is a sign that there may not be much strength ahead. All the more reason to be alert toward the end of the month.

NYSE Summation Index

Sentiment

The SentimenTrader (courtesy of same) remains 2/3 negative on the long term. Should it continue to drop further into the red, it will add to the other warnings that beginning to appear elsewhere.

Sentiment

The VIX

The VIX continues to decline along with the SPX, whereby it should be going in the other direction. The only way I can interpret this action is that it is bullish for equities.

This index, like the SPX, appears to be in a Large A-B-C consolidation, a corrective wave which puts it in an intermediate downtrend. It also appears to have farther to go on the downside. The indicators are in a decline and there is not sign of a low appearing in them.

The P&F chart calls for the VIX to reach about 21 before its decline ends. There could also be a period of base building while the indicators work themselves in a reversal position. This should give the SPX time to complete its "C" wave.

BONDS (TLT)

TLT is doing a better job than VIX in moving against the SPX. It has kept on rising as the equity indices have continued to correct. Also, as opposed to the VIX, it is showing more strength than the SPX is showing weakness.

According to its P&F chart, TLT should double-top at 123-124. It closed above 122 on Friday and should reach its final near-term high next week as the SPX completes its correction.

UUP (Dollar ETF)

UUP's attempt to push through its long-term downtrend line looks premature. It has already been pushed back, and the indicators are beginning to roll over after the MACD showed some obvious negative divergence.

Another factor to consider is that there is a regular 25-day cycle which appears to control the index, and it may have made its top and be ready to bring about a decline into early January.

UUP does have a P&F projection to about 22.80, so it may have one more little upward thrust before giving up. This would be in sync with a final low for the SPX correction.

GLD (GOLD ETF)

I have been suggesting for several weeks that GLD may be entering an intermediate correction. Actually, this started three months ago after a climactic move which almost reached the important projection target of 187-189.

The following Weekly Chart of GLD shows that the price actually peaked at 185.85, where heavy selling took place, sending the index into an immediate 32-point plunge to the nearest support level. This turned out to be wave A of the largest corrective pattern for GLD since October 2008, and it was followed by a wave B retracement of about 61.8 of the decline.

GLD has now started wave C which has already violated the low of A and, according to the P&F chart, seems destined to continue down to 141-143 which, in all likelihood, will be the end of wave C. However, there is the possibility of an extension of the correction down to 134.

One should make sure that GLD is only making a corrective wave, and is not engaged in a long-term correction. By dropping to 134 after failing to hold 141, GLD would muddy the analytic water.

A higher potential count (to 233) derived from the P&F chart suggests that what we are seeing is only a much needed intermediate correction.

Summary

As anticipated, the market has continued to correct, but it is now approaching a potentially important reversal point: the resumption of the wave "C" rally.

From a cyclic and technical viewpoint, another short decline appears to be needed to conclude the corrective pattern. This could take place early next week and be complete by Tuesday or Wednesday. The total base which will have been formed by then should give us a good idea about how much of rally to expect.

FREE TRIAL SUBSCRIPTON

If precision in market timing for all time frames is something which is important to you, you should consider a trial subscription to my service. It is free, and you will have four weeks to evaluate its worth.

For a FREE 4-week trial.  Send an email to:  ajg@cybertrails.com

For further subscription options, payment plans, and for important general information, I encourage you to visit my website at www.marketurningpoints.com. It contains summaries of my background, my investment and trading strategies and my unique method of intra-day communication with Market Turning Points subscribers.

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