• 751 days Will The ECB Continue To Hike Rates?
  • 752 days Forbes: Aramco Remains Largest Company In The Middle East
  • 753 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,153 days Could Crypto Overtake Traditional Investment?
  • 1,158 days Americans Still Quitting Jobs At Record Pace
  • 1,160 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,163 days Is The Dollar Too Strong?
  • 1,163 days Big Tech Disappoints Investors on Earnings Calls
  • 1,164 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,166 days China Is Quietly Trying To Distance Itself From Russia
  • 1,166 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,170 days Crypto Investors Won Big In 2021
  • 1,170 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,171 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,173 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,174 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,177 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,178 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,178 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,180 days Are NFTs About To Take Over Gaming?
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

  1. Home
  2. Markets
  3. Other

SP500: Dead Cat Bounce

Monthly time frame:

  • The 10 mma has a negative slope
  • In addition we know have a lower high and a lower low

We should not rule out that SP 500 has begun a corrective phase that could open the door to a 0.382 retracement of the advance from the 2009 low which would coincide with a test of the Double Top break out (2000 and 2007 highs), I am talking about the range 1574-1553.

S&P500 Index Daily Chart
Larger Image

Weekly time frame:

  • Friday's intraday drop below the August low has negated the Triangle scenario
  • Going forward the Head and Shoulder could become the prevailing pattern. The measured target is located at 1611
  • On Friday the August low was temporarily breached but held by eod
  • Below the August low the next support is located at the October 2014 low at 1820. Then below we have the trend line from the 2009 low

S&P500 Index Weekly Chart
Larger Image

  • The decline from the May high is not impulsive (It brings to agreement of a corrective phase)
  • So far we have a Zig Zag in progress with Fibonacci extension targets for the wave (C) in the range 1776 - 1683
  • A Zig Zag can establish the end of a correction or it can morph into a Double Zig Zag / Triple Zig Zag

S&P500 Index Ending Diagonal Chart
Larger Image

Daily time frame:

  • The wave (C) is unfolding an impulsive decline
  • We should be close to the bottom of the wave (3)
  • Hence I expect a brief turnaround (Dead cat bounce). A wave (4) rebound with a potential target in the range 1950-1972
  • Once the wave (4) is in place one more down leg will conclude the Zig Zag from the May high.
  • We will have to reassess the pattern as a bottom or a large snap back rally will follow.

S&P500 Index Ending Daily Chart
Larger Image

Reasons to expect an oversold bounce:

  • Equity put/call Ratio has reached the upper Bollinger Band (Contrarian indicator)

CBOE Options Equity Put/Call ratio

  • The McClellan Oscillator is oversold and it is displaying a positive divergence

NYSE McClellan Oscilator Daily Chart

 

Back to homepage

Leave a comment

Leave a comment