4310 Right Around The Corner

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IWM vs. SPX 

IWM showed a little more life last week but still trails SPX, especially when compared to the latter’s rise above its March high, from which point it continued to move higher while IWM essentially jogged in place. Consequently, the relative weakness prevails, and the warning of an approaching high remains valid.

SPX daily chart 

The daily SPX finally made a new all-time high last week, the first one since May 6 – but only by a measly 14 points. I should not have to explain what this means: “A correction is coming!  A correction is coming!” -- perhaps over the next 10 days.

If looking at the deceleration in the price index itself is not enough, take a look at CCI. If you go back to the beginning of the page, you see that the green has been punctuated by an occasional red. So long as the green prevails, the index remains in an uptrend. When the oscillator turns red, we are given a sell signal which stays in effect until the CCI becomes green again.   

The CCI also gives an advance warning in the form of negative divergence. This is currently (mildly) in effect, so we know that, unless the negative divergence disappears, we should be on our guard for the start of a price decline.  

The lowest oscillator is based on the A-Ds. It provides a good confirming signal to the CCI. It too is showing (strong) negative divergence. When all three oscillators go negative, the index should begin its correction.   

When should that take place? Not that we really need to be that precise, but we have access to another advance warning system. According to the long-term P&F chart, the index should top near 4310 only 60 points away from where we are today.  

SPX hourly chart 

SPX is, to some extent, governed by a short-term cycle which spans about 26 calendar days or about 17-19 trading days (red asterisks). It varies substantially in amplitude, and the current one is a good example of this. We are ostensibly one to three days away from its low, and it has not yet pressured SPX into a short-term downtrend. Since it does not have a history of inverting, I must assume that its low is still ahead of us and will occur early next week. After that low, the index should be ready to make its final high in the designated price range.  

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The above comments, as well as those made in the daily updates and the Market Summary about the financial markets, are based purely on what I consider to be sound technical analysis principles. ...

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