Minor Cycles Peaking

As stated above, the market action suggests that it made a short-term top on Wednesday. If so, a reversal from here is likely to find initial support in the area of the dashed red line drawn at the former 2954 top. But we could easily go beyond if enough selling pressure is exerted by the minor cycle which is expected to make its low next Thursday or Friday. Since the top formation may not be complete on the P&F chart, we do not have a firm count for the first leg down, although an immediate reversal would likely generate a decline of about 50 points which would correspond to a retracement to the dashed line or slightly lower.  

The daily indicators also suggest that we have arrived at a short-term top. All three have started to roll over and two are showing some minor negative divergence which is more defined in the A/Ds.  

SPX hourly chart

The holiday caused a time gap not adjusted by Qcharts which is somewhat affecting the accuracy of the trend lines, but does not render them totally useless.And it did not affect the heavy blue trend line (// to the blue channel lines on the daily chart) which connects the first two tops of the rally and was not reached at the top of the third peak. This created divergence in the hourly momentum oscillators which worsened on Friday, but not nearly as much as it did in the A/D indicator.

A reversal on Monday-Tuesday would probably target the bottom of the last gap that was left partially unfilled on the last retracement. This is also the area of the (blue) 50-hr.MA which will eventually have to be broken to signal that we have started something more than a minor decline. 

QQQ, SPX, DJIA, IWM (weekly)

If strength in the daily SPX chart creates uncertainty about what the market is doing, this is immediately dispelled when we look at the relationship between the weekly charts.Although DJIA has somewhat caught up with SPX and QQQ, IWM (on the contrary) has recently lost even more RS to the other indices with not just one, but two diverging tops. This should be a clear signal to the bulls that the market strength -- which is confined to SPX now that QQQ has started to underperform – is illusory.

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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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