Mighty Market Continues Advance

A mighty market did not let a trivial matter like its long-term top channel line stop its advance, and last week it punched through and closed outside of it. Nevertheless, this is not a break-out. Instead it is likely to be the end of the phase which started at 2856. Cycles bottoming in February should see to that. 

IWM (169.07) found support on its 9-ma and was caught up in the bullish frenzy, eliminating the relative weakness which was showing for the past two weeks. Although it is approaching it, it still remains below its August 2018 high (173.39).

SPX daily chart 

It appears that the uptrend from 2856 has gone exponential. Each subsequent phase has risen at a sharper angle than the previous one with the last one piercing outside of the bull market channel from 2009. Given that the next P&F projection target has been reached, and that important cycle lows lie directly ahead, a sharp price retracement is imminent.  

Friday saw a record high of 3329.88 in the last 15 minutes of the session with a close near the high, but a minor cycle is likely to pull prices down into Tuesday or Wednesday. With the futures down six points after the close, we already have a hint that we should get a retracement when the market reopens. This could be followed by some hovering around 3330 for a little while before the February cycles take over and cause a very swift and sharp correction. I have posted the Fibonacci levels which are likely to mark the low of that correction. Even if the decline only retraces normally to the .382 level, this would amount to a 184-point drop which will take many by surprise given the steady march higher of the index with little consolidation along the way.  

Because of the price pattern, the momentum indicators were not able to give much of a warning, but the A-D indicator (at the bottom) clearly showed declining breadth support for prices, including a downturn at Friday’s top.

SPX hourly chart  

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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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