Lets take a look at the weekly index cycles for the usual six main indexes
IWM (representing Rus'2000 small cap)
IWM is holding within the broad up channel from the June lows. Bears should be seeking a break <80, that will open up 76. The 72 level will be critical for those seeking a collapse wave - either late this year, or in 2013.
The underlying MACD cycle is set to go negative at the open next week, we should see some further downside price action.
What was the strongest index is now becoming one of the weakest (although it will be near impossible for any index to match the state of the transports).
The Nas' comp managed to close @ 3005. I do not expect that level to hold on Monday. Next soft support is around 2900/2850.
The MACD cycle is now already negative, and there is great potential for a considerable fall into late November. A very bearish sector, and it could be an early warning of trouble for both the Dow/SP.
The Dow tried to break the highs from last week, but failed. The Friday decline was very significant, and the closing candle for the week was a very spiky one, the sign of a failed rally.
First target is 13000, and then 12500. All indicators are turning very bearish, and a major snap lower is anticipated this coming week.
The master index is still within its broad up channel, but the closing candle was a very spiky one, the sign of a failed rally. The underlying MACD cycle is due to go negative in about 3 weeks.
Bears need to see this hugely broad index break below the big 8000 level.
The sp' managed 1462 this week, a mere 12pts shy of its QE spike high of 1474, yet it rolled over, and the decline on Friday was the largest since late June.
First target for the bears should be to take out the Monday low of 1427, and then the important cycle low of 1397. If the bears can see the SP' in the 1380s this coming week, then a very swift move to the low 1300s is viable. My target zone would be around 1325/00.
The tranny remains a literal train wreck. Bears should seek an October close <5000, preferably though, somewhere in the 4800/4700 zone. The late Autumn target remains 4500/4400.
Certainly, for those bears short from the start of the week (that includes, yours truly), it was not the easiest of weeks. We came within 1% of setting new index highs on the Dow/SP', but the failure to break upward was very telling. The bulls are getting real tired. Not just the rally from the June sp'1266 low, but all the way back to the March 2009 sp'666 low.
Those deluded bull maniacs (and deluded they most certainly are) have been given their Christmas 2012 present already - QE3. What do they really have next to hope for? I realise there is a likely Spanish bailout likely in the near term, but that will probably only motivate the market higher for a day or two, if that.
With underlying global economic weakness, and the looming US fiscal cliff, the bulls have a real brick wall ahead of them on their beloved can-kicking freeway. How far away is the wall? It could be days, weeks, or even some months, but the wall will be hit, and its going to really hurt.
A special note, we have Q3 GDP this coming Friday, I'm looking for something <0.5% or so, which will bode badly for Q4 - which I'm pretty certain will be at least moderately negative. Corporate earnings are already showing clear signs of trouble, I can't imagine the next set of results being any better, in fact, they will likely be significantly worse.
The primary monthly trends remain largely bullish, so those bears getting excited after the Friday decline, need to keep things in perspective. There is NO clear turn lower on the monthly index charts (aside from the tranny, which has been a mess since the start of the year) Until we see a monthly close, somewhere around sp'1350/00, the bulls should still be said to be in control.
However, we do have some very clear warnings on the weekly charts, I most certainly expect some multi-month downside yet to come.
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I will be back on Monday (or Sunday night, if the Futures are showing some 'exciting' action).
Good wishes for the coming week