Consolidation Ahead

Current Position of the Market - Consolidation Ahead

  • SPX Long-term trend: There is some evidence that we are still in the bull market that started in 2009, a market condition which could continue into the first half of 2021 before major cycles take over and it ends. A move up to ~4500 is possible before the current bull market makes a final top and SPX corrects into its next major cycle low due in 2023.
  • SPX Intermediate trend: Phase three (wave 5 from 3723) is now likely underway.
  • Cycles: Looking ahead.
  • Seven-Year cycle – Last lows: 2009-2016. Next low: ~2023.

Market Analysis: IWM - SPX Weekly Chart

Structurally, IWM appears to run a little ahead of SPX. Starting from the March low, IWM has already completed three waves up while SPX is still in the final stages of doing so. This is the reason for the “early warning” which is regularly given by IWM. It is therefore likely that IWM will remain in a warning mode until SPX has completed wave 3, which may still be a couple of weeks away  

SPX Daily Chart

At the daily level, SPX is showing the deceleration pattern which precedes a minor top. During the past two days, the index crawled to a fractional new high, but each day it failed to retain its daily gain and it pulled back at the end of the day. This is better illustrated on the hourly chart which we will analyze next.  

This deceleration is caused by the imminent bottoming of an ~18-week cycle expected to make its low next week. The index appears to have reached the end of wave 1 of 5, and the cycle would ideally bring about wave 2 of 5 since the amount of distribution established last week is not very substantial and the minor correction may not exceed the 4130 level.     

With the rally from the 4061 low, the oscillators have fully recovered from their negative readings and are strongly positive. They are expected to remain positive while wave 5 from 3723 continues to unfold, and will warn us that it is about to end when negative divergence appears in the CCI.

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Charts are courtesy of QCharts.

The above comments, as well as those made in the daily updates and the Market Summary about the financial markets, are based purely on what I consider to be ...

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