Minor Cycles Peaking

"Enough congestion was produced at last week’s low to take the index up to about 2995-3000.”  

On Tuesday, SPX surged to a new all-time high of 2995.84 and closed at 2995.82, meeting the projection target set for this move.On Friday, prices dropped to 2968 in the first two hours of trading, but then started to recover and finished down only 5 points for the day.

Last week’s action may have spelled the perfect scenario for a short-term top with a climactic move to the target, an initial reversal and a re-test of the high. Considering that a minor cycle peak was expected in this time frame, you could not have asked for better cooperation from the index – providing that we resume the short-term downtrend on Monday and continue to decline into next Thursday or Friday. Even a slightly higher high into the low 3000s would be acceptable, if less perfect.  

If the above does occur as foreseen, the correction should continue into early August, at least. Recent strength which drove the index to new all-time highs has bolstered the technical position of the intermediate indicators, and the risk of an imminent return to or beyond the December low has pretty much evaporated. But this does not mean that we have eliminated the possibility of still being in some type of corrective structure.  

Technical Analysis (Charts appearing below are courtesy of QCharts.

SPX daily chart 

The original (blue) channel was broken after prices reached a high of 2954, and the decline continued until it had retraced exactly .382 of the move from 2346. The index is now progressing in a new (purple) channel which could still be a corrective major wave IV in spite of the fact that SPX has now risen to a new high. We will know better after seeing the path taken by the index over the next few weeks. If, after the anticipated near-term retracement, we make significant new highs, it will be time to revise our thinking. In order to show that we are still in a corrective pattern, we should come out of the purple channel before making new highs.  

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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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