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.

SPX Hourly Chart 

The green trend line which I mentioned a couple of weeks ago is turning out to be a reliable guidepost for the SPX. Two weeks ago, after providing support for several weeks during which it was tested several times, the trend line finally gave way to the largest short-term correction since the beginning of the last intermediate trend.

After making an initial low at the bottom of an ascending channel, a countertrend rally developed, which found resistance precisely on the broken trend line. After completing its correction in a 3-phase pattern, SPX put on another good show of strength and wasted no time in making a new high. However, look at where the rally stopped: on the broken trend line again.

Friday’s high is probably the top of the rally, which should be followed by another short-term correction, repeating the pattern that was set into motion after the start of the new intermediate trend. Although we do not yet have confirmation that a high has been struck, the presence of two minor cycle lows directly ahead (the first potentially on Monday-Tuesday, and the next on Feb. 15) makes Friday’s high likely -- although the lack of clear divergence in the oscillators warns of a possibility inversion in the first cycle.

The correction should start as soon as we come out of the small blue channel which denotes the second phase of the rally.  

UUP (Dollar ETF) Weekly Chart

UUP has pushed a little higher in its recovery from a drop down to the major, long-term trend channel where it found support after a prolonged correction. Deceleration in that major downtrend gave notice of at least a rebound in prices. This was confirmed when the index broke above its 50-dma last week. It is likely that it will now move a little higher, perhaps even challenging the top trend line of its major corrective channel.

GDX (Gold Miners) Daily Chart

As expected, GDX continued to correct until it retested its recent low. It may now consolidate for another week or so at this level before attempting another move out of its corrective channel.  

PAAS (Pan American Silver Corp) Daily Chart

PAAS had a premature break-out when silver became entangled in the short-covering fury which affected some speculative equities pushed on Reddit. The problem was that there were few shorts to panic over in silver, and cycles were not ready for an important move. Consequently, PAAS could not follow through and quickly returned to its base, where it should remain a little longer until a more genuine attempt at a rally can proceed.  

BNO (U.S. Brent Oil fund)

BNO has successfully surpassed two resistance lines, and is now attacking the third one on its way to fulfilling a move to its price target of ~16 before it pauses in its short-term uptrend.  

Summary

With the short-term correction over, SPX has moved on to making a new all-time high. But this should give way to another minor pull-back as the index continues its pattern of short-term higher highs and higher lows until it reaches its intermediate target of about 4150.