SPX May Have Found Bottom

“…the P&F chart … gives us three separate projections pointing to the 2360-2400 level.  Based on this information, we should be looking for an important low in the near future.”   

The above was written last week under our daily chart analysis. The low of the move came at 2346.58 (close enough) on Dec. 26 and produced a rally of 122 points by the end of the day. This should have told us that something more than a one or two-day low was struck on that date. Indeed, after correcting briefly, the index made a new recovery high on Friday which could be extended before the next reversal.

So where are we in this bear market? Not yet at the end! This is made clear by the reading of the weekly indicators which appear to be confirming our original suspicion that we could drop all the way to 2200 before the corrective move  runs its course. We’ll get more specific about the exact turning point when the market permits.  

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

SPX daily chart  

Besides the target suggested by the Point & Figure chart, another hint that we were approaching a low was given by the daily indicator readings which had been showing deceleration and finally divergence by the previous Friday. This is always a strong warning that a reversal is about to take place. And reverse it did, with 122-points in one day for SPX, and nearly 1200 points for the DJIA. Volatility persisted the next trading day with a range of 90+ points on SPX followed by a higher close. Everything indicates that this only a secondary move in a primary downtrend which is far from being over. It is made even more clear by the weekly chart, which is the best time frame to turn to for intermediate and long term signals.

There are standard Fibonacci measurements that are useful in establishing projections for any given market move and which work well in conjunction with the counts provided by Point & Figure charts.  When a target is established by this process, verification of its accuracy is also obtained through the use of other market tools such as trend lines, moving averages, and oscillators. As of now, there is no sign that the 2346 low is the final low of this correction and we’ll continue to monitor the weekly chart for a warning that we are getting close to the end of this correction.  The estimated target for the SPX is approximately 2200.

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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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