A Short-Term Top?

Current Position of the Market

  • SPX: Long-term trend – We are in an official bear market.
  • Intermediate trend Concluding initial rally in a downtrend.

A Short-term Top? & Important Cycles

The downward pressure of the 45-to-date cycle (80-cal.days) was minimized by the 36-to-date cycle (52-cal.days), which made its low on May 14; but, unless it is inverting, it should have enough left to bring the market down into the end of the week.

Point & Figure Overview of SPX

Re-accumulation at the 3010 level could take the index to about 3070.                                                                                                                                     

Market Analysis & SPX-NYA weekly charts

(Charts courtesy of QChart)

The disparity of relative strength to the SPX is not confined to IWM. This week, I am posting NYA vs. SPX to show that NYA (the broadest index), is just as much of a laggard as IWM. The reason for this is that the large tech stocks have led the recovery from the March low by a wide margin. These stocks are also included in SPX, and are contributing to its relative strength.

Consequently, it is somewhat misleading to look at SPX (and better yet, NDX) as representative of the stock market recovery. To-date, SPX has retraced a little more than 71% of its decline, while NYA has fallen short of 62%.  

SPX daily chart 

The blue trend lines are converging and making a wedge pattern, indicating that, since mid-April, the SPX has been decelerating. However, after a two and a half-week correction into the 36-to-date low, it managed to make a new high, which may just now be in the process of making a short-term top. The smaller pattern, which emerged from that correction, is in itself making a wedge pattern; so, unless a strong price extension takes place in the next day or two, a reversal is likely into the low of the 45-day cycle due at the end of the week.  

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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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