Market Turns - Short-term Outlook

By: Jim Curry | Mon, Apr 9, 2007
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S&P 500 CASH INDEX
SPX CASH: Daily Projected Support and Resistance levels: High - 1448; low - 1440
JUNE SP: Daily Projected Support and Resistance levels: High - 1457; low - 1449
SPX CASH: 5-Day Projected Support and Resistance levels: High - 1459; low - 1430
JUNE SP: 5-Day Projected Support and Resistance levels: High - 1468; Low - 1439
SPX CASH: Monthly Projected Support and Resistance levels: High - 1467; Low - 1392
SPX CASH: Yearly Projected Support and Resistance levels: High - 1531; Low - 1319

Current analysis: The SPX spent the earlier part of Thursday's session in consolidation mode, here holding an early-day dip at 1436.67, then rallying up to new highs for the move with the tag of 1444.88 - here made in late-day trading. Volume came in at 1.24 billion shares, which is a 9% contraction from Wednesday's levels. And, coming on a day where a higher high was registered, this is viewed as a bearish technical indication heading into early this week - even though the close near the highs for the day and for the week on Thursday should signal higher highs out there.

From the cyclic table above, the 10 day cycle is now 4 days along at Friday's close, while the larger 20-day cycle is now 16 days along. Both are due to re-peak in the coming days, with again about 80% of the 20 day up phases in this position having seen their peaks made on or before the 18 day mark (which would equate to Tuesday of this week). Short-term resistance is firming at or near the 1451-1455 region, and might have the best 'look' to complete the current 20 day up phase. Once complete, the probabilities will lean in favor of another quick drop back to the rising 18-day moving average (1418), which looks likely to move up towards the new weekly projected support low of 1430. In other words, a rally to the low 1450's - assuming short-term resistance holds - should ideally be followed by a retrace back to the 1418-1430 region on the next 20 day down phase. For now, the only confirmation that the 20 day down phase is in force would be for a daily close below 1433.96 SPX CASH. Otherwise, on the flip side to the above should a drop back to the 1430 weekly projected support low be seen before making a tag of noted resistance, then the market could well be a buy for a try at one more new high before this 20-day cycle tops out.

On the left side of chart 2 (below) shows the original forecast path with the 10 and 20 day cycles from the 3/30/07 outlook, which was looking for a low with the 10 day cycle - and then a push to new highs (above 1438.89) with the same into the following 10 and 20 day top. Shortly afterwards, the 10 day cycle confirmed an upside projection to 1440.40 - 1447.60 SPX CASH, which has obviously been hit on the recent run up; the chart at right shows how it played out, and also shows where near-term resistance is located, and also places the 18-day average on the same. This same chart had us going short-term long the SPX at 1413.96 on 3/29/07, then exiting the late that same day and early the following session at 1423 and then 1428. Once the trend was confirmed, it then put us long again on 4/2/07 at 1425, and then exiting that again the following session at the 1438-1440 levels.

For the bigger picture, Thursday's push above the 1442.34 level is our best indication that our larger 120 and 360-day cycle bottoms were in fact registered at the 3/14/07 swing low of 1364.06 SPX CASH - and thus that the same are now heading higher. If that is correct, then we would expect to see bullish right translation with the smaller daily cycles, which we have seen on the most recent 10 day rotation and obviously on the current 20 day up phase. We should also expect the next 20 day down phase to hold above it's prior bottom (which is also the March low), and then to be followed by a higher high on the next swing up into the larger 45-day cycle top. In other words, once the current 20 day top is in place, the assumption should be for a quick correction with the same (lasting only 2-6 trading days), then to be followed by higher highs on the next 20 day up phase - which in turn should try and peak the 45-day cycle in early-May.

NASDAQ 100 CASH
Daily Projected Support and Resistance levels: High - 1820; Low - 1806
5-Day Projected Support and Resistance level: High - 1838; Low - 1787
Monthly Projected Support and Resistance levels: High - 1838; Low - 1741
Current analysis: The NDX saw some initial weakness in Thursday's session, here dipping down to a low of 1798.53 at the intraday bottom - which right at the daily projected support low (1798). From there, firming prices were seen into the afternoon and then further into late-day action, with the index reaching it's high of 1812.94 at the closing bell. Volume here came in at 1.54 billion shares, which is about a 10% contraction from Wednes-day's numbers. And, coming on a day where a higher high was registered, this is viewed as more short-term bearish than bullish, even though the close at the highs for the day and the week would tell us to expect higher highs before the next short-term peak is in place.

As per the notes from the recent outlooks, there is an outstanding upside projection from the 10 day component to 1818.49 or higher, which ideally will be hit before the next 10 day peak; as well, there is also an upside projection with the 45-day cycle to 1835.15 or higher. Once the 10 cycle tries to peak in the next day or three - of which the probabilities will favor a right-translated cycle - then the odds will then lean to a mild correction back to the 9 day moving average or lower (chart 3), which is currently at the 1787 level at Friday's close; this just also happens to be the new weekly projected support low. Remember, however, the 20 day cycle is in a different position on the NDX than it is with the SPX; that is, this 20 day component is seen to have bottomed at the 3/39/07 swing low, and thus is only 5 trading days along to the upside at Thursday's close (chart above). In other words, the short-term cycles are in a much more bullish configuration than they are on the SPX, which might argue for the NDX to hold a higher relative strength in the days ahead.

For the bigger picture, Thursday's push above the 1812.11 '360-day reversal point' indicates that the yearly projected resistance high of 1979 should be the upside attractor in the weeks and months ahead, with the 120-day cycle actually confirming an upside projection to 1875.60 - 1912.40 NDX CASH at Thursday's close. In terms of time, the current rally phase should ideally last into June or better before peaking, though anytime a test of yearly projected resistance is seen we would have to reassess the technical picture at that time to try and discern whether a larger peak is attempting to form. Stay tuned.

 


 

Jim Curry

Author: Jim Curry

Jim Curry
The Gold Wave Trader

Jim Curry is the editor and publisher of The Gold Wave Trader, which specializes in using cyclical analysis and various technical methods to time the markets. He can be reached at the URL above.

Disclaimer: The financial markets are risky. Investing is risky. Past performance does not guarantee future performance. The foregoing has been prepared solely for informational purposes and is not a solicitation, or an offer to buy or sell any security. Opinions are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable. The methods used to form opinions are highly probable and as you follow them for some time you can gain confidence in them. The market can and will do the unexpected, use the sell stops provided to assist in risk avoidance. Not responsible for errors or omissions.

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