A Market Not For The Faint-Hearted

On Thursday of last week SPX was down 62 points. On Friday it was up 84. This market is not for the faint-hearted. Daily moves of 700 points or more are becoming common place for the DJIA. But you might as well get used to it because it shows no sign of abating, and more of the same is predicted for 2019. Great for traders who are on the right side of the trade. Volatility aside, the index is doing what it is supposed to do, which is rallying in the primary downtrend that started three months ago when SPX was at 2941.  

Since the 2346 low of Dec. 26, what is construed to be a bear market rally has already tacked on 184 points and, after Friday’s performance, is likely not done yet. As I have mentioned before, the extent of counter-trend rallies or declines can be estimated using Point & Figure counts and Fibonacci ratios. The initial move after the recent low carried the index to a high of 2520 (which is what the P&F count had been estimated to be) before a three-day correction occurred, whereby a .382 retracement of the decline from 2800 was 2516. You can’t do much better than that.

On Friday, the index reached 2538 during its fourth hour of trading and consolidated between that high and 2522 during the rest of the session. Undoubtedly, the proximity of the February low of 2532.69 was deemed to be a good place to take profits after a daily move of 80 points. The question is whether the index spends some time consolidating in this area, or moves on right away. We’ll know Monday.

If the rally does extend before coming to an end, a 50% retracement would take prices to about 2575, and one of .618 to 2528. These levels, should they be reached over the short-term, would be a good place to anticipate an end to the rally and perhaps a resumption of the primary trend. However, while the bear market is expected to continue, when and exactly how much lower are still open questions.

Chart Analysis  (The charts that are shown below are courtesy of QCharts)

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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 ...

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