Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Correct into Bitcoin Happy Thanks Halving - Earnings Season Buying Opps - 4th July 24
24 Hours Until Clown Rishi Sunak is Booted Out of Number 10 - UIK General Election 2024 - 4th July 24
Clown Rishi Delivers Tory Election Bloodbath, Labour 400+ Seat Landslide - 1st July 24
Bitcoin Happy Thanks Halving - Crypto's Exist Strategy - 30th June 24
Is a China-Taiwan Conflict Likely? Watch the Region's Stock Market Indexes - 30th June 24
Gold Mining Stocks Record Quarter - 30th June 24
Could Low PCE Inflation Take Gold to the Moon? - 30th June 24
UK General Election 2024 Result Forecast - 26th June 24
AI Stocks Portfolio Accumulate and Distribute - 26th June 24
Gold Stocks Reloading - 26th June 24
Gold Price Completely Unsurprising Reversal and Next Steps - 26th June 24
Inflation – How It Started And Where We Are Now - 26th June 24
Can Stock Market Bad Breadth Be Good? - 26th June 24
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Heading for a Early Week Short-term Top

Stock-Markets / Stock Markets 2010 Dec 19, 2010 - 05:38 PM GMT

By: Andre_Gratian

Stock-Markets

Best Financial Markets Analysis ArticleCurrent Position of the Market

Very Long-term trend - The very-long-term cycles are down and if they make their lows when expected, the secular bear market which started in October 2007 should continue until about 2014-2015. 

Long-term trend - In March 2009, equity markets began an upward corrective move in the form of a mini bull market.  Cycles point to a continuation of this trend into 2011.


SPX: Intermediate trend. Technical observations point to a potential top in mid to late December, but this will most likely turn out to be only a short-term correction. 

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.

Overview:

The SPX is making a top which could come as early as Monday or Tuesday.  If this occurs, not enough distribution has taken place to label it as intermediate, and the odds favor only a short-term top.   

I am posting a new projection graph which I am using as a substitute for a Point & Figure chart that I keep by hand and am unable to reproduce.  It shows the accumulation pattern which was created prior to the start of the current rally and, by breaking it down into separate phases, several potential price projections which can be derived from it. 

I mentioned last week that my preferred target was 1248.  Since then, the index has moved up to a high of 1246+, had a small correction and moved back up to reach 1245+ on Friday.  In doing so, it has formed two confirming counts, one at the 1226 level, and one at the 1240 level which both also project 1248.  With such a strong projection to 1248, and with multiple indications that the rally is coming to an end, we should be prepared for an imminent reversal. 

For all intents and purposes, the count was filled when the SPX reached 1246.46 on 12/14, and the current move may only be a test of the high, which means that we could start with a decline on Monday morning.  On the other hand, the index could decide to go for perfection and reach the preferred level.  We’ll find out tomorrow. 

If a top does form in this area, enough distribution has taken place to bring about a correction to about 1206.  I will adjust the projection after the decline has started. 

Note also that I have identified the top as a potential Head & Shoulder pattern.  We’ll see if it holds up as such over the next few days. 

Analysis 

The weekly MACD is showing some mild divergence, but the momentum indicator is only overbought.  This, in itself, tells us that there has probably been too much strength in the advance from 1011 for this top to be of intermediate proportion.  In order to create an intermediate reversal, the SPX would have to trade below 1173.  There has not been enough distribution to suggest that that level will be challenged.

On the Daily SPX Chart which appears below, I have identified the main bull channel in green, and what I consider to be the intermediate trend channel in blue.  Neither one appears to be in immediate danger of being broken.  The bull market has subdivided in several trends. Identifying and keeping them separate can be helpful in following the progress of the index in the future. 

I have already suggested that, based on the distribution pattern at the 1246 level, the next reversal is only likely to bring about a short-term correction.   Channeling confirms it.  Until prices move out of the intermediate channel, the move which started at 1011 is intact.  

The indicators display the characteristics of an impending top.  If the index turns down from this level, they will give a sell signal.  Putting this together with the fact that the price is reaching the pre-determined target, a reversal of the trend appears to be imminent. 

To clarify the market position even more, let’s look at the Hourly Chart.  The trend deceleration which

normally precedes a reversal is obvious.  Until 12/14, the SPX was trading in the upper half of its blue channel.  On that date, it started to decline, reached the bottom trend line, and is now crawling along that line.  When it reaches its 1248 target, it should reverse, break through the trend line, and continue to decline until it finds temporary support on the purple channel line.  There, additional support from other trend lines should create an interim rally of a few points before reversing again.  Then, the SPX should continue its decline until it reaches the projection target around 1206. 

The weakness which appears in the chart pattern is also reflected in the indicators.  As in the case of the daily indicators, it would not take much to get a sell signal, and trading below 1232 could set off the next declining trend. 

Cycles

There are some short-term cycle lows due in early January.

Long-term cycles (7-yr, 60yr, 4-yr, 2-yr) are up until 2012, but could turn down earlier as a result of the pressure exerted by the very long cycles.  From a cyclic perspective, we should start to expect the end of the bull market after mid-2011.   

The very long cycles (120-yr, 40-yr) are down and due to bottom in 2014-15. 

Projections

1248 continues to be the preferred target for the end of the rally which started at the end of November, but this projection was essentially reached when the SPX made a high of 1246+.

Breadth

The NYSE Summation Index (courtesy of StockCharts.com) remained practically unchanged over the past two weeks.  This, in spite of an oversold RSI (and while the SPX had a 70-point rally) points out the inherent breadth weakness.

Sentiment

The SentimenTrader (courtesy of same) long-term index has grown a little more negative, but is still not at a level consistent with a market which has reached a top of intermediate nature.

In April, the VIX had a low of 15.23 which was followed by a substantial market decline.  On Friday, it traded as low as 15.46 and although this is not expected to forecast a top of the same significance as that of April, it does confirm the negative readings that I pointed out in other indicators. 

Dollar index

After an initial rally from its November low, the Dollar index had a short correction and is now attempting to resume its uptrend.  A strong move is not anticipated, but there may be just enough follow-through to affect the equity indices adversely and bring about the anticipated short-term decline. 

Gold

After reaching its 139 projection, GLD corrected, double-topped, and is now extending its correction.  It should move back down to 129 before an attempt at extending its uptrend. 

Summary   
The SPX is trying, once again, to reach its 1248 target.  Whether it does or not, all signs point to the need for a short-term correction, possibly starting as early as Monday or Tuesday.

FREE TRIAL SUBSCRIPTON

If precision in market timing 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 the claims made by the following subscribers:

Thanks for all your help. You have done a superb job in what is obviously a difficult market to gauge. J.D.

Unbelievable call. U nailed it, and never backed off. C.S.

I hope you can teach me about the market and the cycles. I want to be like you and be the best at it. F.J.

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

© 2005-2022 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