Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Rally Expected to Continue

Stock-Markets / US Stock Markets Jan 28, 2008 - 09:13 AM GMT

By: Andre_Gratian

Stock-Markets

Best Financial Markets Analysis ArticleCurrent position of the Market

SPX: Long-term trend - Election years that fall in the 8th year of the Decennial pattern call for consolidation in the early part of the year followed by a strong finish. But the 6-yr cycle which is scheduled to bottom in late Summer/early Fall could play a restraining role, followed by an eventual bull market top in 2009-2010.

SPX: Intermediate trend - an extended intermediate-term consolidation is in process.


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 ajg@cybertrails.com .

Overview

Last week was marked by extraordinary volatility in the markets. On Wednesday 1/23 the Dow Jones Industrials had a swing of 632 points, selling off from the opening and closing near its high of the day. Market activity was generated fundamentally by several factors, the main ones being massive selling by Societe Generale, France's second largest bank, to cover losses in positions acquired by a "rogue" trader, and a shock and awe 75 basis point cut by the Federal Reserve after holding an emergency meeting ahead of its scheduled meeting next week. There was also action on a fiscal stimulus package and talk of a bail out of distressed bond insurers.

If you prefer a technical explanation for the market weakness, 3 weeks ago, the SPX closed below its long-term trend line and went on to close below the August low of the 4.5yr cycle the following week. In any case, technical and fundamental factors combined to cause a selling climax which should put a floor on the market for a while.

Volatility continued into Friday with the SPX having a 40-point range for the day, opening strong but selling off after reaching a Point & Figure base projection as well as a short-term downtrend line and resistance ceiling.

Most indices managed to eke out a small gain for the week with the Russell 2000 as one of the best performers. But they were all outclassed by the Banking index which was up 11%. It's been a while since we've seen this kind of performance from the banks! The relative strength in both of these indices could be significant.

Next week the Fed is expected to deliver another rate cut of at least 25 and perhaps 50 basis points.

What's ahead?

Momentum:
Let's look at a daily chart of the SPX. The low of the 20-wk cycle brought the index below its long-term trend line and it was not able to move prices back above. When it failed, prices continued down and fell below the important 1360 support level and continued into a climactic low on Tuesday and Wednesday. Prices then rallied swiftly to the former 1360 support -- now turned resistance -- which coincided with a short-term downtrend line, from which they were pushed back once again.

The two oscillators gave a tentative buy signal by closing above their descending trend lines, but they failed to rise above their former highs. They will have to do this to make it conclusive. Of the two, the lower one which is the MACD of the A/D is the most bullish because since the December decline started, it has remained above the low which it made back in November.

The downward momentum clearly exhausted itself last week in a selling climax accompanied by huge volume, and there are strong indications that this was at least an important short-term bottom. But for a conclusive buy signal, we need to resume the uptrend and close above the trend line and the 1368 high. Friday's retracement is most likely a test of the lows.

It is too soon to make a decisive pronouncement about what kind of a low we made last week. The extent of the rally, the performance of the advance/decline, and especially the behavior of the indices after the rally is over will determine this. Some indicators, such as the AAII Sentiment Index which is giving its most bullish reading in 10 years, and the strong positive divergence in the NYSE Summation index suggest that this is more than a short-term low. The SPX is the only one of the three main indices which has broken out of its long term channel. The Dow industrials broke below but closed above last week and the Nasdaq remained well within.

Cycles
All the important cycles which bottomed in the last half of 2007 have failed to hold up prices and have been penetrated to the downside. In the last newsletter, I suggested that this could be due to either fundamental economic factors which were currently overriding cycles, or to the 6-yr cycle which will bottom later on this year.

I have also discussed a strong seasonal pattern in the DJIA which has existed for the past century during presidential election years and which brings weakness to the market in the first part of the year. I believe that the combination of this pattern and the current sub-prime and credit crisis may well be responsible for the intermediate correction that we are experiencing. If this is the case, it should be over by May at the latest and possibly much sooner if the efforts of the Federal Reserve and the administration to shore up the economy and prevent a recession is successful. If not, we may have to wait for the 6-yr cycle to make its low in the early Fall before it ends. A lot of technical damage has been done to the averages in the past 6 weeks and it will need to be repaired. Exactly how is a question that only the market itself can answer over the next few weeks.

There is another possibility which should be kept in the back of our minds. Major cycles are due to bottom about 2012-14. If the Decennial pattern fails to bring a new market high in 2009-10, it will be evidence that they have topped. Some respected analysts believe that we have already started a bear market, but this opinion is by no means unanimous and I believe that taking this position is premature.

Projections:
When the SPX broke below 1363, it triggered a Fibonacci projection zone of 1236 to 1286. There was no obvious Point & Figure pattern to substantiate that target. However, at the lows, this type of charting demonstrated its peculiar ability to signal the level of accumulation which was taking place. While the daily bar chart of the SPX only shows two bars down on Tuesday and Wednesday of last week, a one-point reversal P&F chart formed a base 149 points across, revealing that major buying was taking place. Tuesday and Wednesday formed two distinct phases, and Wednesday's gave us a projection up to 1372. On Friday the rally peaked at 1368, only 4 points away! According to the chart, the current pull-back should be a midphase decline and then a move to 1424 should be expected. The base even shows a reasonable count to 1467.

What is even more interesting is that P&F counts often coincide exactly with Fibonacci levels. In this case, if we take the recent decline to have started from 1523, 1368 represents a 38.2% retracement, and 1424, 61.8%. 1467 would be 78.6%! No wonder old-time traders who did not have the benefit of computers used Point &Figure charting extensively.

As for the retracement which started on Friday, the top is comprised of multiple phases giving multiple projections, beginning with the level where the pull-back has stopped at 1328 to much lower, with one of the most probable being about 1320 which is also a level of good support.

Breadth
While the breadth figures during the rally were not impressive, neither did they reflect the severity of the decline. This shows clearly on the hourly figures, but even more so on the closing figures as you can see on the daily chart above. And look at the NYSE summation index below (courtesy of StockCharts)! There is a substantial non-confirmation of the decline. What does it mean? The next few weeks will tell us for sure, but one has to consider the possibility that this decline, as severe as it was, did not entail broad-based selling.

Market Leaders and Sentiment
Positive intermediate divergence remains in favor of the NDX. While the SPX broke below its long-term trend line, the NDX has not. Nor has it broken below its January level while the SPX has. Short-term, they remain roughly in synch.

The Investors Intelligence Bull/Bear ratio has declined from a very bearish 3.10 to an almost neutral 1.3. The ISEE put/call ratio continues to be predominantly bullish, making a pattern very similar to the August low. As pointed out earlier, the Insider buyers/sellers index was very bullish in December. It's time to start watching the relationship of banks to the S&P 500. Until now, they have led it to the downside. If they have found a low and begin to reverse, this should have a positive influence on the SPX.

Summary

From the last Newsletter: While the market has declined to new lows in the past two weeks, reliable indicators have become more bullish. But some suggest that a little more time may be necessary before an intermediate low is made.

The low made last week, which was climactic in nature, is at least an interim low of the current intermediate-term correction. Because of the bullishness shown by some indicators, it could turn out to be something more. The base which was formed indicates that a rally to 1424, and perhaps 1467 is possible.

Andre

A market advisory service should be evaluated on the basis of its forecasting accuracy. This is probably the best all-around value. Two areas of analysis that are unmatched anywhere else - - cycles and coordinated Point & Figure and Fibonacci projections -- are combined with other methodologies to bring you weekly reports and frequent daily updates.

The following are examples of unsolicited subscriber comments:

What is most impressive about your service is that you provide constant communication with your subscribers. I would highly recommend your service to traders. D.A.

Andre, You did it again! Like reading the book before watching the movie! B.F.

I would like to thank you so much for all your updates / newsletters. as i am mostly a short-term trader, your work has been so helpful to me as i know exactly when to get in and out of positions. i am so glad i decided to subscribe to turning points. that was one of the best things i did ! please rest assured i shall continue being with turning points for a long while to come. thanks once again ! D.P.

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

By Andre Gratian
MarketTurningPoints.com

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 strategy.www.marketurningpoints.com

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 http://www.MarketOracle.co.uk - 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