Another Short-Term Dip Ahead?

Current Position of the Market: Another Short-Term Dip Ahead?

  • SPX Long-term trend: There is some good evidence that we are still in the bull market that started in 2009, which could continue into the first quarter of 2021 before coming to an end. 
  • SPX Intermediate trend: May continue until SPX reaches ~ 4150.
  • Cycles: Looking ahead. 90-year cycle – last low: 1932. Next low: 2022.
  • Seven-year cycle – last low: 2016. Next low: 2023.

Market Analysis -- SPX-IWM daily charts

By continuing to show a lack of negative divergence to SPX, the IWM is still telling us that we have not yet arrived at an intermediate peak in the market and that the new short-term dip which is currently expected will only be another minor correction on the way to a higher realm. This coincides with the March base P&F projection, which suggests that a top of intermediate proportion should not be in place until we have reached 4150-4210 in the SPX.

SPX Daily Chart

Despite the warning from the negative divergence that had formed in the oscillators, which suggested that we could be ready for something more than a short-term correction, the pullback was brief, though steeper than anything since the start of the last intermediate uptrend (3234-Oct. 30).

The correction is now over, and SPX has reached a new high and is ready to continue its pattern of brief pullbacks followed by new all-time highs. That is, until it has reached the 4150-4210 level wherein this pattern could give way to our first substantial retracement since late October 2020.  

For now, after reaching a new all-time high at 3894 on Friday, the index is ready for another short-term consolidation, which could continue into Feb. 15 and could possibly reach about 3795.

The downside projection is a rough estimate based on a potential 50% retracement of the previous rally. With a high occurring on Friday, there has not been enough time for a distribution pattern to form on the Point & Figure charts from which we can draw a count. Since a dip is likely early next week with a following bounce, by mid-week we may be positioned to determine a correction based on the P&F chart.

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Charts courtesy of QCharts.

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