Saturday 10 August 2013

Weekend update - US monthly indexes

The primary trend for US equities remains unquestionably to the upside. The market has only seen one significant monthly decline since the Oct'2011 lows. However, there are initial signs that sp'1709 will be a short term high, with moderate downside into September.

Lets take our monthly look at the most important of the index cycles...


It is a truly incredible aspect to reflect upon, that of the last 23 trading months, only 5 have been to the downside..and of those, just one (May' 2012) arguably rates as significant.

The current ramp is a 'hyper-bullish' wave on any basis, and even if we do decline into September, the sp'500 could fall to the 1550s, and that would do zero damage to the broader bullish trend.

Bears need to break the rising support from the 2009 lows, which in Sept' will be in the mid 1500s. I do no expect that to be broken.

Nasdaq Comp

The tech' is already higher by almost 1% this month. However, we are trading outside the upper bollinger, and this market is now clearly over-stretched. First downside target is the 3400 level, that's about 6/7% lower.


The mighty Dow is one of the weaker indexes, and is really stuck in the mid 15000s. I do not expect 16k any time soon. First downside target is the rising 10 MA, which will be in the 14500s this September. So, the bears have a possible 1000pt correction viable.


The master index is getting kinda close to the big psy' level of 10k, but I don't think its viable in the current up wave. Downside target is around 9k...that is around 7% lower.


The second leading market index is still pushing upward, but with an RSI of 74, its looking overbought. Primary downside target is the rising 10MA, which will be in the 950s this September - that is about 9% lower from current levels.


The old leader is starting to offer the first sign of a spiky top on the August candle, and I think there is a very significant chance we'll close the month moderately red, with follow through in the first half of September. Primary target is the 6000/5800 zone.


In many respects, the bulls should still be very confident about the mid/longer term. The only issue is about the short-term overbought condition. On any basis, the indexes could all fall back to their monthly 10MAs in September..before a renewed push higher into Christmas..and continuing all the way into spring 2014.

So the bulls have a very comfortable buffer zone of 6-10%, without ruining the general up trend.

Where is Mr Market headed?

The monthly trend is obviously still up, but as I've noted lately, the weekly cycle charts appear maxed out at sp'1709, with target downside to 1600/1550 by mid-September. As ever though, I'm trying to keep in mind a few of the broader scenarios...

sp'monthly'6 - four of the broad scenarios

Right now, baring a FULL end to the QE-pomo program (which I don't expect), I have to go with scenario B. A brief wave lower into mid September - sp'1600/1550, before renewed upside into spring 2014 . where the sp' will be close to breaking into the 2000s.

The notion that a multi-year top has been put in at sp'1709, I just don't see that, although I realise that a fair few leading people out there are calling a multi-year top in the sp'1700/50 area.

Looking ahead

There are a fair few pieces of econ-data next week. Tuesday has retail sales, whilst Thursday has CPI - which might really affect the precious metals (to the downside, I think).

*there is significant QE next Thur/Friday. So, the bears have a 3 day window from Mon-Wed.

All things considered, bears should look for the sp'1670s Mon/Tuesday, with a moderate up cycle into the Friday opex.

I particularly like the following H/S formation idea...

*I am short the main indexes (from sp'1699), seeking an exit around sp'1675, no later than early Tuesday. The plan is then to sit back until late Thur/Friday..with a re-short in the 1695/1700 zone.

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back on Monday :)

The bears achieve a small victory

With the weekly close below sp'1700, the bears have achieved at least something this week. The weekly index charts appear to be maxed out, and are showing the initial signs of a rollover. Primary downside target into mid-September remains the sp'1600/1550 zone.

sp'weekly7 - the bearish outlook


Well, it sure was a frustrating day. Opening minor declines soon flipped to brief gains..only for the bulls to fail again at sp'1700..and then a moderate wave lower.

The same old problem remains though. The bears lack any real downside 'power', and indeed, the VIX is reflective of this, remaining in the 13s.

All things considered, the closing blue candle on the weekly 'rainbow' chart is about the best the bears could have hoped for this week.

Next week, looks set for further minor declines, and I think we'll get stuck in the mid 1670s, before yet another small rally into Thur/Friday (opex), when there also happens to be significant QE-pomo.

Goodnight from London

*next main post, late Saturday, on the US monthly index charts

Daily Index Cycle update

The main indexes closed moderately lower, with the sp -6pts at 1691. The market leaders of Trans/R2K slipped by 0.6% and 0.1% respectively. Certainly, not the most bearish of days to end the week, but neither do the bulls have a weekly close in the sp'1700s.





Another week comes to a close, and the market fails to close on a high..the horror!

The sp'1709 high is now a good 1% away, and the bulls should be at least mildly concerned that the weekly charts are highly suggestive of a rollover into mid September.

Underlying MACD (blue bar histogram) cycle ticked lower for a fourth day, and the trend indeed remains 'moderately bearish'.

The target for Monday remains sp'1675, with VIX in the 14/15s.

a little more later...