US Stock Market on Shaky Ground!

By: Brad Gudgeon | Fri, Apr 3, 2015
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Last article, I wrote that volume studies showed recent net outflows even as the market moved up during the recent OPEX /FOMC rally. I talked about the Rising Wedge, which when broken would cause a big drop. Well, we have some cracks showing up on the daily MACD indicator that is implying some tough days ahead for the US stock market.

I thought we would rally more than we did this week, but the Monday to Wednesday drop this last week caused me to see the light, so to speak, about the proper e-wave count going forward. It is implying a "b" wave in process in an a-b-c down move. The last 'c' wave up of "b" is due to terminate on Monday April 6 near 2095/96 SPX and next week should see a repeat of what happened from March 23-26. That means we gap up Monday to set up for the drop. I have a downside target near 2026 Thursday April 9, and the likelihood we see a double bottom on Monday April 13 near 2028.

The next step is a snapback rally to test the bottom of the rising wedge near 2101 on Tuesday April 21. Important Bradley turns are due on April 3, April 14 and April 22. We have Wave (a) on March 13, wave (b) due on April 20-21 and Wave (c) due on May 12 near 1935 (Bradley due May 10, a Sunday). We likely will trade an irregular bottom much like we did into the February 2 bottom this year with bottoms due on May 26 and June 9 (a .618 retracement of the final a-b-c rally labeled A on December 26) near 1924-25. There are important Bradley turns due on both those latter dates in May and June. The May 12 low is a .618 retracement of the entire rally from October 15 to February 24 at 1935 SPX.

The charts below show the MACD daily on the SPX and Dow Industrials:

S&P500 Daily Chart
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DOW Daily Chart
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I don't show the irregular bottom projection into May 26 and June 9 on the chart of SPX. Obviously, it will break the yellow channel, portending things to come. Out of this bottoming pattern in January and February came the rally to new highs in latter February and early March. I expect the same out of the June 9 low, before we crack even harder into October to near 1700 or below per the Irregular Megaphone Pattern discussed before.


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Brad Gudgeon

Author: Brad Gudgeon

Brad Gudgeon
BluStar Market Timer

BluStar Market Timer Investment Philosophy: The stock market is currently in a technical Elliott Wave Bear Market Rally. It has been exhibiting A-B-C type waves instead of the normal 5 Waves since the market topped in 2000. According to "The Original Works of R.N. Elliott", we are due for a move down to about the S&P 500 442/443 area in the next few years. In my opinion, this is no longer a buy and hold market, but a traders' market. We mainly swing trade the market with funds and ETF's, but otherwise trade according to the market's disposition and to the traders' discretion. For the year 2014, BluStar Market Timer is rated #1 according to Timer Trac.

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