Bull trap ?

The bulls have been persistent beyond any prediction.

$NDX moved above the recent high; $SPX stopped right at the high; $DOW and $RUT lag.

I guess everyone is waiting for this week's data points to come in, starting tomorrow.

Unless proven otherwise, our model points to the downside.

When the down side scenario evaporates, we will then have to call this leg an extension (not yet).

Till tomorrow. 

In $RUT we trust

$SPX clocked a double top today and failed to break out.

On the hourly and daily charts, $SPX registered overbought before turning lower starting at 2:00 pm.

Also, our forward trend indicator (SPY:VXX) indicated on the hourly chart the start of a new (short-term) wave down at the close.

$RUT analysis on the hourly also indicated that the down-trend that began last Friday is still in play, displaying a a little over 82% retracement upward of Friday's drop.

The bonds were also little changed after their jump last Friday.

We still do not have confirmation on the daily for a new down leg in stock indicies, despite our bearish view for several days now - perhaps tomorrow, "turn around Tuesday".

Weekly performance review

We continue to advocate the scenario that 1,597 on April 11 2013 is an important top, as several waves of different time frames converge in that range (see March 30, 2013 post for analysis).

To this end, we experienced a first leg down to 1,536 on April 18, 2013, the size of which is consistent with this type of waves over the last decade.

Subsequently, we experienced an upward retracement which reached almost 90% of the April 11 - April 18 down wave,  extending our projected range (62-75%). In fact, last spring we saw a 90% upward retracement (by May 1, 2012) of a down market that started on April 1, 2012. Also, similar scenario occurred in Oct 2012. Therefore, the degree of this recent retracement should not be a surprise.

As stated on last Thursday's post, we have confirmation on the $SPX hourly of the beginning of a new wave down since April 25, 2013 and indications on yesterday's daily chart. Perhaps we will have confirmation of this new leg down next Monday.

Based on the data from last Thursday and Friday, our quantitative model projects the next target at 1,560, and after a short bounce, a lower low. More on the down trend targets next week, as new data from $SPX will allow us to calculate our targets more accurately.

This blog shall not be perceived as investment advice. This is a personal diary of our thoughts on the markets. Consult a professional broker or adviser before investing.  Any opinions, news, research, analyses, prices, or other information contained on this blog are shared as personal thoughts and provided as general commentary only.

Trend is Down

Yesterday we reported the beginning of a new wave down starting at 12:00 noon (Thursday).

Today's action support yesterday's prediction of a top of 1,592 on $SPX. Our short term indicators and quantitative wave analysis signal down.

Today's drop was led by small caps, then tech, then SPX and $DOW closed positive (flight to quality). To this end, bonds did very well today, further pointing that money is moving away from risky assets (small caps) and into large cap and fixed income.

Next short term target is 1,560.

Upside action must be over now

Today's positive price action was surprising but not unfamiliar.

The high extended beyond our range, exceeding 75% retracement, which is somewhat rare.

We maintain the position that when the upwards retraction is over, the market will head lower to 1,500.

A daily close above 1,602 would invalidate our scenario.

 

Short term top is in

Today's price action met our projection for a short term high of 1,582 in $SPX, which was announced in last Saturday's plan. 

Now, we would like to see a precipitous drop that should reach the 1,500 range. 

We still need a negative close tomorrow for confirmation of this trend.

Overall, we maintain the position that what we experienced since April 18 is a short term correction upwards of a larger wave down.

A close above 1,602 will invalidate our scenario. 

Bounce up continues

Second day of bounce upwards reaches 71% of total drop from April 11 - 18.

Depending how AAPL quarterly reports does today, we may have one more day up, reaching 1,582 or so (75% retracement see our graph from last Saturday).

Although we are experiencing this up leg, we believe that it is normal to last week's drop.

From a tactical point of view, we would like to see a precipitous drop after this ascend is complete.

A close above the previously stated 1,602 would invalidate our current scenario. 

Short term bounce

Today $SPX briefly entered our projected, from last Friday, short-term target range of 1,565 - 1,575 (1,565.55 to be exact)

When this bounce ends, the market is expected to turn down with a "vengeance".

Review of our model versus market action

We began forward testing of our model in November 2012 and started publishing our findings on this site in January 2013.

Here we review our records and display them for the readers.

This blog shall not be perceived as investment advice. This is a personal diary of our thoughts on the markets. Consult a professional broker or adviser before investing.  Any opinions, news, research, analyses, prices, or other information contained on this blog are shared as personal thoughts and provided as general commentary only.

The trend is down

We experienced a pull back upwards today, with small caps showing the strongest performance of the major indices.

Interestingly, $SPX close right at yesterday's high, a bearish sign.

The bonds stayed steady.

Although we may experience further upside on Monday (could go as high as 1,565-1,575), the overall trend of this leg, until proven otherwise, is down.

A positive close next Monday may change our short term direction to up, while midterm direction remains down.

Trend is down

The market continued to lose ground, with $SPX closing below its 50 EMA, a bearish sign.

Although the market never moves in a straight line, our next target, as explained yesterday, is in the 1,500's.

Because $SPX has yet to close on the daily chart below the important level of 1,538, and because some of our indicators display oversold levels on the daily charts, the reader should not be taken by surprise if the market moves higher in the near future. 

Trend is down

Our prediction that yesterday's high at closing was an inflection point (end of b) towards further down movement proved accurate by today's drop in the $SPX below last Monday's April's 15 low (1,552). 

To this end, we believe that wave a ended at 1,552 last Monday and wave b ended at 1,575 yesterday (50% retracement of a).

We also advocate that we are in wave c at this time, a tradable wave that will subdivide into 5 smaller waves. To this end, we believe we experienced the end of wave 1 of c today at 1,543 (12:50pm), followed by wave 2 of c (currently underway), which has a target of 1,560 - 1,568 on the $SPX (if not completed today). After completion of wave 2, we will experience wave 3 down (targeting 1,500).

From a tactical point, we are awaiting confirmation that the present (upwards corrective) wave 2 is completed and wave 3 (of c) ensues downwards. 

Medium term target is 1,460 (range of 1,450 - 1,480) on the $SPX

A daily close above 1,576 invalidates the projections above.

DISCLAIMER: This blog shall not be perceived as investment advice. This is a personal diary of our thoughts on the markets. Consult a professional broker or adviser before investing.  Any opinions, news, research, analyses, prices, or other information contained on this blog are shared as personal thoughts and provided as general commentary only.

Short-term trend is down

Both our quantitative analysis as well as trading indicators suggest a down trend.


Price action today displayed a normal 50% retracement, in a form of an a-b-c, almost to the penny, of $SPX's leg down from last Thursday's high of 1,597.35 to yesterday's low of 1,552.28.

The bonds are subdividing into upwards waves, with $TNX remaining below the critical 1.8 level.

We expect the market to turn lower again in the near future, once this upwards retracement is complete. We can not exclude the possibility, however, of further upwards movement on the $SPX(could reach 1,586) as part of this retracement (low probability).

Next down-trend target is 1,505 - 1,530.

A daily close above 1,598 invalidates the above prediction.

As we posted over the weekend, our intermediate target for this down leg was 1,570, which occurred at 12:00 noon today. After a 2 or so points retracement upwards, the market continued to move lower, reaching 1,552 at the close, stopping right at the 34 day EMA. The depth of the drop was beyond our predictions, which is often the case in impulsive waves down, as fear governs the market more than numbers.

At this point, the market is oversold on the hourly, but not on the daily chart. Also, the bonds ticked up but not by a lot, leaving the $TNX at 1.702 at the close. For bonds, we expect the old highs to be tested going forward, which is bearish for stocks.

What happens with stocks in the next day or two, will determine market behavior for the next few weeks.

Market Projection from March 23 versus actual

DISCLAIMER: This blog shall not be perceived as investment advice. This is a personal diary of our thoughts on the markets. Consult a professional broker or adviser before investing.  Any opinions, news, research, analyses, prices, or other information contained on this blog are shared as personal thoughts and provided as general commentary only.

SHORT-TERM TREND IS DOWN

Today's price action, following yesterday's new all-time high, suggests that we have a possible top of the $SPX at 1,597.35. From this recent high, the bonds have reversed direction upwards since yesterday's drop of $TNX below 1.8 (today it reached 1.719). The action in the bonds is bearish for stocks, as bond price action suggests a re-test of last July's $TNX low of 1.4.

This morning, JPM and WFC reported quarterly results: The market reacted with a down move, reached important technical targets at 1,580, and then retraced to 1,589 at the close (which can certainly go higher next Monday morning). Next week, C and MTB are reporting on Monday, which will tie in with today's JPM and WFC results. 

On the hourly, this wave from 1,597.35 down to 1,580, based on our quantitative modeling,  has a structure of 5 smaller waves.  Hence, we expect that after the completion of the current upwards move that began today at 11:00am, we shall experience another leg down towards 1,570's.

From a tactical point of view, a daily close above 1,602 will invalidate the above scenario.

Market at a top ?

$SPX clocked 1,597.35 today, which falls within our target range (1,589 - 1,602), reaching extremely overbought levels on the hourly chart. To this end, $DOW reached overbought levels on the daily and hourly charts. $NDX did not make a higher high, and $RUT is below its recent highs. $TNX also fell below 1.8 again today.

Since the 11:27am high of 1,597.35, $SPX has made consecutive lower highs and lower lows intra-day.

Tomorrow JPM is reporting and will likely set the tone for the next few days or even weeks.

New highs, but closing on to a top

$SPX is in a 5th wave up (on the hourly) from the recent low of 1,539.5 of April 5 (1,554-1,548-1,573-1,568-now), with a projected target of 1,595 (range of 1,589 - 1,602) for this particular leg up. 

The high today was 1,589.07, so our range has been met. 

In addition, $SPX on the hourly is overbought

Also, $DOW since the 12,884 low of December 31, 2012, was projected to end at 14,854 (range of 14,805 - 14,900).

In conclusion, our models indicate that we may be close to a top here and hence we are skeptical of any movement of the markets much higher. 

Again, as we have been advocating for some time now, we need to wait and see what trend the market confirms.

MARKET TREND UNDECIDED

Although $SPX made a higher-high by $0.23, it did not manage a daily close above the previous high of 1,573.66. This is a condition, as was stated in our previous post, for a new uptrend signal. 

The move from 1,565 to 1,573.89 today was unexpected and presumably due to a short squeeze. 

We maintain our opinion that we need to wait and see, as advocated the last few days, what happens next: (1) A daily close above 1,574 would suggest that we move towards the 1,600-1,620 target, or (2) a move lower would suggest that we aim for the 1,500.

Price action according to published plan

In our last Friday’s analysis and Saturday’s model presentation of hourly $SPX price prediction, we advocated that $SPX had just found short-term support at our March 15, 2013 predicted level of 1,537 (1,539.50 exactly) and that it would bounce back up to the 1,561-1,565 range.

It is 4:00pm EST in the U.S. and $SPX clocked 1,563.03 at the close, hence ending right in the middle our predicted target range of 1,561-1,565 from last week.

In a few minutes, AA will report quarterly earnings, which in our opinion will guide stock market direction over the next few days.  

As we advocated last Friday and Saturday, we are now at a critical point, whereby the market may roll-over to the down-side for lower lows, or breakout above the recent high of 1,573.66 towards 1,600-1,620 range.  

We will have to wait and see what happens next before we can conclusive discern the market’s next move, although we feel that we are heading lower.

UPDATED  HOURLY  MODEL

THE MARKET MAY BE ROLLING OVER

$SPX displayed a 5-wave down from 1,573 - to - 1,549, then a short pull-back upwards to 1,562, followed by another leg down, reaching this morning 1,539 at oversold levels on the hourly.

Interestingly, the market did not breach the 1,537 level we have been advocating for sometime now. Another characteristic of the market is that the bonds ($TNX) reached overbought levels today.

Now, we are in the midst of a leg upwards that started at today's low and will highly likely reach the 1,561 - 1,565 range.

What happens next at that junction (1561-1565) is critical.

If the market turns down again, then we will reach much deeper levels on the $SPX.

If the market breaks out above the recent high of 1,573, then we will reach the aforementioned 1,600-1,620 range.

The negative fundamentals over the last days, including the weak employment numbers today, suggest that the market may be rolling over to the down-side. If earnings next week starting with AA are also weak, we will likely move downwards. To this end, some large transports have already reported weak numbers and guidance thus far.

In conclusion, it is our current position that the market has began to roll-over to the down-side before reaching our target of 1,600's because of negative economic data. To this end, we believe we experienced the first wave down from 1,573 - to - 1,539 and we are due for a correction upwards to 1,561-1,565, following which we will head lower: First stop will be in the area of 1,500. 

A close above the recent high of 1,574 will invalidate our scenario

TREND IS DOWN

We assume that the recent high of 1,573.66 will hold (unless otherwise proven) and that the market will exhibit impulsive waves down along with corrections upwards. Today was a "corrective" day.

To this end, $TNX broke below the 1.80 support (holding since the beginning of January), a finding that corroborates with our observations on $SPX. This means that bonds will increase in value.

As the market unfolds we will be able in the near future to discern its intermediate direction as well as begin to make predictions for $SPX targets.

Uptrend in danger

Today's close below 1,558 signals that the current leg up we have been tracking since the recent low of 1,578 may have ended early.

At this point we consider our model upwards to 1,600's invalidated and we are watching 1,537.

Before we can confirming a top here, we need to watch market action for a while.

We will be looking for impalsive waves down followed by corrections that will not exceed the recent high.

On our way to 1,580's

$SPX is subdividing according to our prediction model first presented on March 23 (as well as yesterday).

Today's breakout above the recent high of 1,570 further validates our model thus far (including  the recent low of 1,558 as discussed yesterday).

Next target: 1,582 (range of 1,580-1,585).

A daily close below the recent low of 1,558 invalidates our March 23 model.

 

Trend is up

On Saturday March 23, 2013, we published our hourly model for $SPX from the 1,538 low to our projected target of 1,616 (range of 1,600-1,620).

Our model called for a interim high of 1,567 (range of 1,565 - 1,570), which in fact occurred last Thursday March 28, 2013 at the high end of our range (1,570).

Then our model called for a dip to 1,561 (range of 1,558 - 1,564), which occurred today.

Therefore, $SPX is subdividing appropriately and according to our predictive model, en route as we believe to a higher high (1,582 with a range of 1,580 - 1,585). From there, we will dip towards 1,571, and subsequently to new all-time highs (1,600-1,620).

A daily close below 1,537 would invalidate the above model.



DISCLAIMER: This blog shall not be perceived as investment advice. This is a personal diary of our thoughts on the markets. Consult a professional broker or adviser before investing.  Any opinions, news, research, analyses, prices, or other information contained on this blog are shared as personal thoughts and provided as general commentary only.