Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Stock Market Counter Trend Rally Coming to an End

Stock-Markets / Stocks Bear Market Aug 16, 2009 - 04:25 PM GMT

By: Andre_Gratian


Best Financial Markets Analysis ArticleCurrent Position of the Market
SPX: Long-term trend - Down! The very-long-term cycles have taken over and if they make their lows when expected, the bear market which started in October 2007 should continue until 2012-2014. This would imply that much lower prices lie ahead. This will not be a straight-down decline, but a series of intermediate-term rallies and declines until we have reached the low point.

SPX: Intermediate trend - The counter-trend rally which started in March is now coming to an end. The objective for a high is being reached and deceleration is becoming apparent. If the top has not already been reached, it should be, shortly!

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 charts which determines the course of longer market trends.

Daily market analysis of the short term trend is reserved for subscribers. If you would like to sign up for a FREE 4-week trial period of daily comments, please let me know at .


Ever since it reached my projection of about 1000, two weeks ago, the SPX has gone essentially sideways. In the last newsletter, I also mentioned that we had reached an area of resistance. That, too, was apparently correct. What has not yet proven out is that long term cycles should be turning down in this time frame, although that was the prognostication.

The SPX reached 1018 on 8/7 and has been trading in a narrow range since, finding support just above 992. In order to reverse its trend, the index should close below this level decisively.

Some Elliott wave analysts have also tagged this area for the high of the rally which started in March. Robert Prechter of EWI recently re-affirmed the vulnerability of the market at these levels, warning that the next move could potentially take it back down to the recent lows.

Some EW counts call for the market to move a little higher and this is certainly possible, but the volume pattern of the DJIA during this entire rally should give the bulls some concern. It has been a steady decline from the beginning -- not a bullish pattern!

On the other hand, as we will see later, the NYSI is still making new highs along with price. In other words, there is enough ambiguity to refrain from calling for a top to the counter-trend rally until we begin to see a clear reversal.

What's ahead?

Chart Pattern and Momentum

The weekly chart shows little change from two weeks ago. The index has stopped making new highs and has preserved its bearish wedge pattern. The indicators are overbought and some minor negative divergence has begun to appear in the histogram. A lower close next week could easily generate a sell signal in the indicators.

The daily chart (below) shows how the SPX found resistance at the top of its wedge pattern. The small red horizontal line drawn at the 992 level must be broken for a reversal to occur. But for a confirmation of a major reversal, we would have to move down through the 30 and 50 DMAs, and the green uptrend line which represents the lower boundary of the wedge pattern. This could take some time to unfold!

All the indicators show negative divergence. The lower (A/D) oscillator, has been in a declining pattern for about a month, and the two above (momentum) are finally beginning to follow it. I mentioned some time ago that the type of rounding top formation we were making might take some time to complete. This is proving to be so.

The last leg of the rally has been primarily fueled by encouraging earnings and economic reports which have created the perception that the recession is behind us and that a new bull market is under way. It will take some signs that this is a false perception to reverse this trend. Friday's lower than expected consumer confidence reading could be the beginning of a re-assessment of reality.

The hourly chart (above) gives us a chance to examine more closely the potential top formation that is taking place. After making its high of 1018, the index broke an uptrend line and retested the 992 support level. It subsequently went back up to find resistance on the underside of that trend line, and on Friday sold off one more time on the lower than expected Confidence Index report, found support at the former lows, and rallied into the close.

The two levels of support, one at 995, and the other at 992, have contained prices on the downside since 8/5. They will have to give way the next time they are tested for a reversal to occur. This coming week offers such an opportunity with a short-term cycle bottoming on Monday and another at the end of the week.


There is a minor cycle bottoming on Monday, and a somewhat more important one at the end of the week.

This is the time period when longer-term cycles have been slated to start rolling over into next year, and we could have some evidence that this has started. But until we have a definite reversal, we cannot make that claim with a great deal of confidence.


The primary projection was to about 1000. The index, thus far, has peaked at 1018. We don't expect longerterm projections made several weeks in advance to be exact, although they often are. If they are exceeded by a good margin, as this one was, this may be a sign that we are not quite done with the move and that another move higher may be coming. Since the short-term cycles are still pushing down, there is a better chance that we will break support first and move down to an initial projection of about 980-982.


The McClellan summation index below (courtesy of StockCharts) has made a new high, which confirms the move made by the price index, but by the same token, not only is this the 3rd and probably the final wave of this index, but the RSI is both overbought and showing negative divergence. This is an indication that we have arrived (are arriving) at the top of this move, and that this will not only affect this index but the SPX as well.

The daily breadth readings are showing negative divergence relative to price.

Market Leaders and Sentiment

The NDX/SPX ratio (courtesy of StockCharts) continues to predict a potential end to the relative strength of the NDX over the SPX .

Here is another interesting chart: Goldman Sachs has been a market leader in this rally. This is a snap-shot of its current hourly chart. I am not fond of head & shoulder patterns because they fail so often, but what makes this one compelling is the little blow-off spike at the head. It just adds to the other signs that we may be at an important market juncture, especially if the H&S turns out to be valid.


This is what I wrote two weeks ago for a summary:

The list of signs that the move from 667 is running out of steam is very long and the projection of about 1000 which had been made for the top of the rally has essentially been reached.

Nevertheless, short-term conditions do not call for an immediate reversal, and the SPX could still make a slightly higher high before beginning a long decline into 2010.

If we do make a top in this area, it is more likely to be a slow roll-over than an immediate plunge.

I see no reason to change a single word of it.



The following are examples of unsolicited subscriber comments:

Awesome calls on the market lately. Thank you. D M

Your daily updates have taken my trading to the next level. D

… your service has been invaluable! It's like having a good technical analyst helping me in my trading. SH

I appreciate your spot on work more than you know! M

But don't take their word for it! Find out for yourself with a FREE 4-week trial. Send an email to .

By Andre Gratian

A market advisory service should be evaluated on the basis of its forecasting accuracy and cost. At $25.00 per month, this service is probably the best all-around value. Two areas of analysis that are unmatched anywhere else -- cycles (from 2.5-wk to 18-years and longer) and accurate, coordinated Point & Figure and Fibonacci projections -- are combined with other methodologies to bring you weekly reports and frequent daily updates.

“By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint.” -- Mark Twain

You may also want to visit the Market Turning Points website to familiarize yourself with my philosophy and

Disclaimer - The above comments about the financial markets are based purely on what I consider to be sound technical analysis principles uncompromised by fundamental considerations. They represent my own opinion and are not meant to be construed as trading or investment advice, but are offered as an analytical point of view which might be of interest to those who follow stock market cycles and technical analysis.

Andre Gratian Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules