Correction Approaching

Current Position of the Market

  • SPX Long-term trend: For now, the best estimate is that we are still in the bull market which started in 2009.
  • SPX Intermediate trend: We should be approaching an important high, with confirmation coming over the near term.

Correction Approaching

  • P&F target for near-term top: 3365/3390.
  • Cycle cluster ahead: 45-td cycle ~8/14 – 26-day ~8/25 – 36-td ~8-31.

Market Analysis - SPX - TRAN daily charts:  

For the first time since the March low, TRAN is displaying some clear short-term relative strength in regards to the SPX. It remains well behind on an intermediate basis, but this short-term surge may have some interesting implications for the market trend if it persists.  

During the early phase of the bull market of 2009, TRAN took the lead, but soon fell in step with SPX until August 2018. After that date, it started to diverge significantly, implying that a correction was coming. It is too soon to determine what this short-term positive divergence signifies. Let’s see where it leads us.  

SPX daily chart  

We are quickly approaching the low of the 45-td cycle. This means that the next few days should be marked by a price reversal and, because of the extreme right translation of this cycle, a quick drop is likely when the projection target has been reached. The high could come between 3360 and 3390, or even push higher to 3430.  

There are additional cycles bottoming after this one, forming a cluster of lows which could create a two or three-week correction before the index continues its uptrend. By making new highs, the momentum indicators have lost the mild negative divergence which had developed about three weeks earlier.

The A-Ds, however, have been diverging since June, the date when the last correction occurred. The CCI went on to make a new high, but the A-D oscillator has remained below its June peak ever since. A normal correction should take us down to between 3015 and 2905.  

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(Charts courtesy of QCharts).

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 ...

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