"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
A Review of the Past Week
Stock market action, this week, conformed to the expectations which were detailed in the last newsletter.
All equity markets were in a rally mode and closed the week at their best levels. The action was validated by strongly positive advance/decline numbers throughout the week, and by the end of the week, even the new highs/new lows joined in. The only important indicator which failed to confirm was the volume which remained low throughout the entire rally.
Three projections for the SPX, 1080/1084, 1096, and 1108, corresponding to three phases, were given to readers on the Signal Alert List. Two of these have been met and surpassed, and we could be in the process of going to meet the third one. There are higher projections which are less solid, but volume will have to improve substantially if we are to even consider them. We are also approaching the 50% retracement of the decline from 6/24, which lies at the 1104 level. This is an important Fibonacci ratio, and it could put an end to this rally.
Current position of the Market.
SPX - Sell. A confirmed sell was given on 3/10 and re-confirmed after prices failed to penetrate the former highs.
Short term trend:
SPX - Moderate buy. Status of trend: Hold. This could change to Sell Alert soon.
You will notice that a different terminology is being used to describe the short term trend. This is because I felt that the previous one was not specific enough to describe the state of the market.
The new terminology is:
a) Buy or Sell alert;
b) Buy or Sell, which will be qualified as weak, moderate, or strong, depending on the technical underpinnings;
c) Hold will be used to signify that the current trend is still in progress.
Note: If you would like to receive an explanation of how I arrive at these signals and be notified on the day that they occur, please let me know at firstname.lastname@example.org The explanation has been enhanced by the outlining of a strategy based on the signals. Once on the list, you will also receive periodical "Closing Comments".
CYCLES: The cycle analysis which was made in the last newsletter proved to be correct. The half-span of the 9 month cycle was instrumental in causing a reversal of prices after it made its low. However, as mentioned above, unless volume comes in to support the move, further progress will be limited. Another reason to be cautious is that the short term trading cycle is due to make its low in about 10 trading days. While this is still distant, we have to remember that we are still in an intermediate down trend with longer term cycles bearing down, possibly until October, and that this is a counter-trend rally with limited potential. Since we are approaching the 3rd projection, and there is a clear 5 wave pattern from the low, we have to be cautious in the near future.
OIL: Crude chose to go directly to its $49 target as projected in the P/F chart which was displayed in last week's newsletter. This was probably a "blow off" move of the trend which started at 31, and possibly at 26. Crude should now enter a period of consolidation/decline from these levels. There are some "weak" counts to the $54 level which could still be reached, but this will be determined by the price action over the next few weeks.
Next week will tell us whether we are ending the short term trend and whether the intermediate trend is ready to take over once again. The overall market is still fragmented, but there are some bright spots as portrayed in the following charts.
These are all important leading indicators. Some are already in an intermediate up trend, and others are re-establishing one. Considering the action of these leaders, one has to wonder just how much more weakness we can possibly experience over the next couple of months. Nevertheless, we'll patiently have to wait for the NASDAQ to get its act together. We won't be able to begin an up trend of substance until that index is ready. The QQQ has a potential projection of 30.
SUMMARY: The short term trend may be coming to an end, and it will unless volume picks up along with an increase in prices. But with so many important leading segments of the market showing bullish patterns and oil seemingly having topped out, any further intermediate weakness could be limited.
I encourage your questions and comments. Please contact me at: email@example.com