Current Position of the Market

SPX Long-term trend: For now, the best guesstimate is that we are still in the bull market which started in 2009.

SPX Intermediate trend: A potential intermediate correction is in progress.

Approaching Initial Objective

• P&F: Short-term projection: 3300-3260.
• Cycles: Looking ahead! 90-year cycle -- Last low: 1932. Next low: 2022.
• Seven-year cycle -- Last lows: 2008-2016. Next low: 2023.
• 20-td – September 17.

Market Analysis - SPX-TRAN-IWM daily charts:  

The most significant change in last week’s charts is that the TRAN has improved its strength relative to the SPX. This should mean that this is not a market top, but a correction in an uptrend. IWM was in step with the SPX and does not forecast any change in the trend.

This is the best correction since June, and some technical factors suggest that a low of sorts could come next week. More time will be required to learn exactly what kind of a low.

SPX daily chart  

Last week, the SPX made a new correction low, found support on the first parallel green line, and bounced. In the process, it broke outside of the blue channel, but not by much, and it may hold ~3000, which should be a strong support level combining the parallel line with the 50-dma.

In addition, it is also the level of the short-term P&F projection from the top (3260-3000). Another factor is that 3275 is a 50% retracement of the uptrend which started with the June low of 3067. These three factors combined provide a reasonable case for a low to be made in that area, especially since it is reinforced by a short-term cycle bottoming on about September 17.

Although the momentum oscillators are still negative, they showed some deceleration and the A-D oscillator managed some positive divergence. Therefore, a rally starting next week is possible and even likely, but what kind of a rally will it be? If it is only a rally to the broken blue channel line, followed by more weakness, we will have the option of stopping at the current low, or going lower.

There is no concrete base formation completed in the P&F chart, and we cannot assess the extent of the rally, but a little more work on the right of the current pattern would produce a formation which could easily take SPX to a new all-time high. There are too many possibilities to contemplate, so we had better wait until we have the rally to evaluate what it does.  

SPX hourly chart 

The SPX is making a diagonal pattern which looks nearly complete, and it probably would be with one more dip into the cycle low due next week -- providing it remains above 3260. Hopefully the short-term cycles going forward will become a little more visible than they were during the uptrend.  

There are many signs that the correction, or this phase of the correction, is coming to an end. The oscillators are all showing positive divergence. In fact, Friday’s low was most likely a 32-cd cycle low, which gives the index an outside chance of already having made its low. If next week is not the final low of the correction, the next P&F count would be down to about 3220.

UUP (dollar ETF)

A $USD chart was not made available from this data provider. Anyways, as expected, UUP has rallied (bounced) from its low, which is likely to be the 3m cycle low. So far, it’s more of a holding action than a rally since it has not yet been able to move above the former short-term high; but as long as the oscillators remain positive, it has a chance of moving higher.

GDX (gold miners)

GDX has not given much ground since more than doubling in price from the low. This is a sign of strength which suggests that another move to a new high could be ready. It has produced enough of a base to take it to at least 53 on the next move. But if it cannot clear the former high soon, it will have to extend its consolidation. The oscillators started a bullish uptrend, but now they require some follow through on the upside.

PAAS (Pan American Silver Corp)

PAAS, which has already nearly quadrupled in price, is also making a strong consolidation pattern, giving back little in this correction. Like GDX, if it can clear the former high, it may be able to reach close to 50 before its next consolidation. Its indicators are in the same position as those of GDX. If they turn negative, it would mean another phase down.

BNO (U.S. Brent Oil fund)

BNO is behaving as expected. It is close to reaching the .382 retracement level, and would have to drop a little below 9 for a 50% correction from the low.  

Summary

SPX is close to finding a low for this phase of the correction and this could happen as early as next week. It is not clear at this time if this will be a resumption of the uptrend, or if a more short-term downtrend lies ahead. The original thinking was that, due to seasonal patterns, this consolidation/correction could last until the early part of October.