Stock Market Retracement Rally May be Over

By: Anthony_Cherniawski

SPX appears to have completed its retracement just shy of the 50% retracement value at 1985.25. If so, it is due for the next decline. This may be point 7 of the Orthodox Broadening Top with point 8 being the crash bottom.

Let’s see how fast the margin calls start coming in. The margin desks at the major trading houses have got to be busy already this morning. Usually the phone call comes first (and may have begun yesterday for last Friday’s shortages), giving until the close to make up the margin shortage. The redemptions usually happen at the last hour of the day unless the market deteriorates badly enough that the redemptions are accelerated.

VIX has bounced off its bottom. There would be more confidence in the sell signal when VIX rises above its Cycle Top at 29.65.

The Hi-Lo index has been right up to the edge of its sell signal at 5.68. However, it is the end of the day that matters here. Buying SPX futures and SPY in the Premarket lifts all boats, but they can only go so far in an ultra-thin market. I am surprised that no one is talking about the lack of liquidity lately. Apparently hope covers a multitude of sins in this market.

It appears that the Chines have eased off on their selling of US Treasuries for now. The problem is, they may not be finished yet. The Cycles Model calls for a possible Pivot high in Treasuries next Tuesday, suggesting that there may be another bout of selling tomorrow or over the weekend.

The Cycle low in USB is not due until September 3 through September 7. This could be a wild ride, since as I pointed out earlier, this may be taken as a signal that the Feds are raising rates. I have mentioned this many times; the fed takes its cues from the market. Since Monday, we have seen the 10-year yield rise by .27%. At the 50-day Moving Average, the rise would be .35%.

Regards,

Tony

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