Reversal Day and Month

We have confirmation on the hourly chart that a new short-term wave down began at closing. As I am writing this, ES futures also turned downwards displaying the beginning of a new short down-trend wave on their hourly chart.

On the daily chart, we observe $SPX transversing the 50 EMA from above to below and closing below this important moving average ($DJI behavior was even more bearish). 

We use Stoch(5,3) in a down trend market to detect the end of upwards retracements: indicator action  suggests that the recent upwards move that started on June 24 may have ended today. 

In both $SPX and ES daily charts we await for confirmation of a new wave down (we do not have confirmation of trend change in the daily like we see on the hourly chart).

Also, we had a significant trend change in the monthly chart today: June displayed a change of direction downwards, of an uptrend that began in January 2013, after hitting overbought in May 2013. To this end, weekly $SPX charts show a downward trend  since the week of May 20, 2013.

All and all, we are waiting for confirmation of a new down trend on the daily chart will signal the beginning of a decline towards 1,500 on the $SPX - perhaps next week. 

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.

Waiting for the market to turn lower again

We are waiting for confirmation that the recent upwards move has ended and the down-trend has resumed. We do not have confirmation of this change yet.

Overall, we advocate that the last days up move is a retracement of a larger move down, targeting 1,530 or a bit lower.

Short term oversold

The market has experienced an impulsive wave down, exactly as we described our expectations in the last few posts.

Currently, we are oversold in a number of ways ( ie on the hourly chart) and hence we may see a bounce up tomorrow.

All major indices pierced through their respective 50 DMA, a sign calling usually for another 5% correction (below the 50 DMA). 

Target for this wave is 1,530-1,540, which represents a series of lows from March and April and a high from February. Also, is -5% from the 50 DMA. Also is very close to the 10% correction from the last May high. Also, when this occurs, we will likely hit oversold on the daily charts.

Short term uptrend may be close to an end

The last uptrend that started on June 13 has now displayed an a-b-c pattern up:

1,608 - 1,639 - 1,623 - 1,654. Each of a and c have subdivided into 5 small waves, and b into 3.

From a quantitative technical analysis aspect, we may (or not) have a higher high tomorrow (as high a 1,665), which is then expected to reverse lower. 

From a fundamentals point of view, the last rally is in anticipation of positive news from the FED (that QE will continue).

However, Gold, Silver as well as Copper signal deflationary trends: Gold + Silver point to QE tapper and Copper+Silver signal to a China slow down. In fact, these metals are almost touching their recent lows. Therefore, the main power levitating stocks is the prospect of more free money from the FED: When/if the FED cuts back, stocks will also come back down. As the market is a 6 month or so forward looking indicator, any sign of FED cut back later in the year may have an effect on stocks sooner than later.

The trend is down

Both in the daily chart and the hourly chart, the trend remained down.

We do not have confirmation, yet, of a new impulsive wave down (in hourly and daily charts).

We would like to see a precipitous drop (massive selling) in order to confirm that the market will dip significantly lower.

Trend down or reversal day

As we claimed yesterday, the market dipped right after the open towards 1,600 (reached 1,608 or so) and then as predicted rallied upwards.

There are 2 possibilities.
1) The market reversed and will continue to rally higher, finding short term support on the 50 day moving average
2) the market trend continues down, and today was a relief rally in a down trend.

Analysis of the daily chart at today's close depicts at this point that we are in a down trend. Analysis of the hourly charts also at this point has not yet confirmed a larger trend reversal. If our analyses are correct, the sharp uptrend reversal today could be explained as a small degree wave-2 (corrective) of a larger 5 wave down structure, aiming much lower.

If our prediction is correct, we should soon see a sharp reversal lower, showing impulsive (wave-3 type of) characteristics

The trend is down

We are en route to touch the recent low of 1,600 on the $SPX, which will coin side with oversold conditions on the hourly chart (probably tomorrow after the opening).

After that, we should have a bounce upwards, followed by another leg down to mid 1,500's.

The trend is down

The short-term upwards retracement appears to have completed in 3 days (prediction was for 1-4 days), approaching 52% of the 1,648-1,623 leg down.

The immediate target for this down leg is again 1,600 on $SPX.

After that, we will have a shallow bounce up, followed by another dip: this last dip may reach as far as 1,565-1,575, but it is too early to call with precision.

Possible reversal day

We have been advocating that this last few days move up is a retracement of a larger decline.

We called it wave-4 of "c", with a target of 1,640 or bit higher (as high as 1,660). We also said that it would last 1-4 trading days.

If our model is correct, then we would have another leg down, below the recent 1,598 low from last week.

Tomorrow could be another tight range day.

Rebound yesterday+today after 2 legs down

The upwards move that started yesterday at 1:00pm and continued today is perfectly normal - it started right after $SPX hit oversold on the hourly chart.

As we explained yesterday, this is wave-4 of "c": Our target for this wave is 1,640-1,662 (1,644 today).

We will spend 1-4 trading days in this wave and then expect to turn downwards again (wave-5 of "c"). 

1,600 target met

As we have been advocating for a while, the market did in fact meet our $1,600 target today (1,598), and then started to move higher.

What we have experienced so far is:

- wave "a" :  May 22 - May 24

- wave "b" : May 25 - May 28

- wave "c" :  wave-1   => 1,674 - 1,640

                     wave-2   => 1,640 - 1,661

                     wave-3   => 1,661 - 1,598

                     wave-4   => 1,598 - current

As of 13:00 today, we are in wave-4 of "c". This is a consolidation wave (with an upwards bias), whereby those shorting will close their positions (as the market reverses) and some others will initiate long positions (thinking that they are buying the dip of a new trend). This will go on for 1-4 trading days and may reach 1,640 or a bit higher.

After the market completes wave-4 of "c", it will likely turn down again, with a target of 1,560 or a bit lower.

The trend is down

$SPX touched a low of 1,607 today, reaching oversold conditions, and very close to our target of 1,600's. 

Interestingly, $SPX bounced on the EMA(50) and closed at the low of the day.

Overnight, we may have a relief bounce up, or more selling - it is just not clear how we will open tomorrow.  It is possible that tomorrow we reach up to 1,622-1,645, although there will most likely see more selling ahead of us.

The trend is down

Today's price action on the $SPX suggests that this down wave is subdividing into smaller waves. 

We are still expecting one more leg down to 1,600 or so at this time.

It is not clear, however, if tomorrow the market will gap down and touch 1,600 (reaching oversold on the hourly chart), or whether it will open and move higher, before it resumes the down direction again. 

The trend is down

The market ($spx) reached oversold on the hourly as it descended to 1,622 or so this morning.

Then the market started to rebound.

When this rebound ends, another leg down is anticipated.