Saturday, 23 June 2012

Daily Index Cycle update

The indexes closed higher today, but considering the big falls on Thursday, today's increase was weak. The bulls should be very concerned, not least if they look at the hourly charts, where there are clear bear flags all set to snap lower on Monday.

IWM, bearish outlook


Sp, 4mth view



Wednesday - FOMC day no less, has made for a superb peak for wave'2. After Thursdays big drop, I remain very confident the peak of this cycle was indeed sp'1363, and we are now in the early days of what should be a very significant drop into the sp'1150/00 zone - as suggested by the monthly cycle charts.

One interesting aspect of today was the weakness in the Transports. Transports had a particularly weak day, and showed some good follow through after Thursdays drop. The tranny remains a VERY bearish index, and a key warning flag for the wider market.

From a MACD (blue bar histogram) cycle perspective, today was day'3 of this new down cycle. We could easily fall a further 5-7 trading days on the cycle before becoming oversold.

I'd guess we have a VERY good chance of breaking 1300 early next week, a fair chance of breaking 1266..and if so...then 1225 - a key monthly trend level, by next Friday. That is a very bold outlook I realise, and clearly, would be invalidated if we break 1363 at any time.

We shall see.