SPX using a long-time support to stay elevated...for now.

By: Anthony_Cherniawski

In a nod to options expiration, it appears that Wave (ii) may extend another day or so. The Cycles Model was strong during the March options expiration. This month the Cycles Model shows weakness.

ZeroHedge reports, “Last week when BofA reported that "everything is being sold" as its smart money clients (institutional, private and hedge funds) dumped stocks for a whopping 10th consecutive week, it said that "BofAML clients were net sellers of US stocks for the tenth consecutive week, in the amount of $3.98bn. Net sales last week were the largest since September, and the fifth-largest in our data history (since 2008). Since early March, all three client groups (institutional clients, private clients and hedge funds) have been sellers of US stocks."

While SPX is short-term positive, there appears to be a limit on the move in the form of narrowing trading bands. They also portend a potential change in trend.

You can see the thin support line across the daily chart, extending from July 7, 2015. SPX is in the Master Cycle originating at that date. The last pause above it was on December 31, 2015. For the time being, SPX refuses to go beneath it.

However, it may not last. John Hussman comments, “From an intermediate-term perspective, the U.S. equity market continues to trace out an arc that we view as the rounded top-formation of the third speculative bubble in 16 years. The S&P 500 is presently at the same level it set in November 2014, and the broad NYSE composite is at the same level it set in November 2013. I’ve frequently emphasized that, with a few exceptions such as 1987, most market peaks are a process, not an event. While we have to be alert for the potential for steep, vertical losses, a historically-informed understanding of this process demands that investors be patient, and refrain from placing too much faith in what I’ve often called the “fast, furious, prone-to-failure” advances that occasionally clear oversold conditions.”

As we watch the Italian Banks crashing and Deutsche Bank teetering, it is also a wonder that BKX is holding its own for the moment. The narrowing trading bands foretell a huge move is in the making.

Regards,

Tony

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