Market Report: Set Up of a Lifetime?
Since my last article things have changed a little and I have had to adjust ideas.
Making the new all time high at 1730SPX things have started to clear up, although I was initially looking for a move back to 1530-1500SPX before a resumption higher towards 1750SPX. It seems this market wants to get to its intended target quicker than I figured.
I currently think this market is in wave 4 of an ending diagonal pattern, so it's likely to see a new all time high, although there is a "forced" way we could label the pattern completed, but based on the current decline from 1730SPX I tend to think it's part of wave 4.
There are some Fibonacci targets I am targeting a bit higher between 1743-53SPX.
If you notice the market is starting to show price structure that is overlapping, that's the mark of a market that is tired, if you look back to the 2000 peak we saw the same thing back then.
I strongly suspect we are setting up something similar, although my preferred route from here is to see a new minor high above 1730SPX.
I am expecting the same sort of result, once this cycle from March 2009 is finished; hence I have named this article "setup of a lifetime".
It should be a decline to shock most traders.
There are times when the market is so extended to the one side that it's like picking money up off the floor; I think we are closing in on one of those times, and a trade setup where those are the right, can make a lot of money betting against the market moving much higher from here.
If you look carefully the last 2 highs have been met with selling pressure and the RSI has failed to confirm the move, that's the signature of an ending terminal diagonal.
The 2000 top and the 2007 tops had similar RSI signatures before they rolled over.
Depending on the direction above or below 1690SPX will help us confirm if the low is in for wave 4.
As the US appears to be focused on the US shutdown, I suspect the "kick start" could come from a deal between the Republicans and Democrats which could push the market above key resistance at 1690SPX, that may happen this Sunday if a deal can be reached this weekend before the markets open on Sunday.
Time & Price
If the market has got a new high left in it, I think we could get close to a price and time target I have been following for a few weeks.
Time wise, it comes in around the beginning of December.
Price wise, it has the ability to move towards 1780SPX although I am really looking for that 1743-53SPX area to be hit to meet my fibbo projections.
Chart courtesy of DecisionPoint.com
The summation index is confirming the ending diagonal pattern and the fact it's looking tired, I suspect its setting up for a major reversal, the last 2 peaks have seen a significant deterioration in the summation index.
That's the signature of a market that is setting up for a large reversal.
I will leave it there for this week.
Until next time,
Have a profitable week ahead.