• 2 hours Workers Walk A Tightrope As Shutdown Puts Paychecks On Hold
  • 8 hours Key Indicators Suggest A Recession Is Closer Than We Thought
  • 1 day Palladium Surpasses Gold As Demand Continues To Rise
  • 1 day Is Another Gold Rally On The Horizon?
  • 2 days Most Crypto Investors Don’t Know This Tax Loophole
  • 2 days How Tech Is Decentralizing The Energy Industry
  • 2 days Dissecting Europe's Massive Tennis Match-Fixing Scandal
  • 2 days This Gold Deal Could Be A Boon For The Mining Industry
  • 3 days 5 Companies That Could Win Big As The U.S. Legalizes Sports Betting
  • 3 days May Survives No-Confidence Vote Despite Huge Loss On Brexit Deal
  • 3 days U.S. Trade Deficit With China Grows To Record High
  • 3 days Big Oil Doubles Down On Blockchain Tech
  • 3 days What Top Financial Analysts Are Saying About Brexit
  • 4 days Billion Dollar Opportunity In The World’s Most Exciting Sector
  • 4 days Cash Is Now A $3-Trillion Safe Haven Bet
  • 4 days How Advertisers Are Forced Into Politics
  • 4 days Automakers Go All-In On Electric Vehicles
  • 4 days How Will The Government Shutdown Impact Gold?
  • 5 days 5 Likely Winners In A Booming $400 Billion Gambling Market
  • 5 days Forget IPOs: Direct Listings May Be The New Trend For Tech Unicorns
The Corporate Buyback Bubble Is Bursting

The Corporate Buyback Bubble Is Bursting

Corporate stock buybacks have surged…

Saudi Stocks Plummet As Foreign Investors Bail

Saudi Stocks Plummet As Foreign Investors Bail

The death of journalist Jamal…

  1. Home
  2. Markets
  3. Other

SP500: The Risk of a New Bearish Cycle is Large

Monthly time frame:

The technical evidence is suggesting that the odds that SP 500 has begun a bearish cycle are large. To keep it simple we have four reasons:

  • MACD has triggered a bearish signal cross
  • The slope of the 10 mma has turned negative
  • The 10 mma has crossed the 20 mma; Red arrows (Pending confirmation at end of the month)
  • We have a sequence of lower lows/highs

If this is the case the trend line from the March 2009 low eventually will be breached and the MACD will lose the zero line. The bearish cycle should establish a bottom when the RSI crosses/reaches the oversold line

Initially as a guide we have three potential targets:

  • Target 1 (Shallow): 2000-2007 double top break out and 0.382 retracement of the rally from 2009 low in the range 1574-1553
  • Target 2 (Moderate): 0.5 retracement of the rally from 2009 low at 1402
  • Target 3 (Severe): 0.618 retracement of the rally from 2009 low at 1227

During a bearish cycle usually there are sharp snap back rallies that fail at the 10 mma. During the 2000-2002 bearish cycle there were five attempts while only two during the 2007-2009 one (Black arrows)

S&P500 Monthly Chart
Larger Image

Weekly time frame:

  • From the May top so far we have a 3-wave down leg (ABC = Zig Zag)
  • The assumed wave (C) can be the wave (A) of a much larger Zig Zag; the wave (W) of a Double Zig Zag or the wave (1) of an impulsive wave (C)
  • The Fibonacci extension targets for the wave (C) are located in the range 1776 - 1683
  • If the decline from the November lower high were impulsive then last week Hammer candlestick would have most likely completed the three wave decline from the May top. In my humble opinion a short-term bottom is doubtful. If this is the case a short-term bottom is more likely to be established at the trend line from the 2009 low, which is located at 177o ish
  • In the weekly time frame the key resistance levels are located at R1 (Trend line that connects the October-August-February 2015 lows) at 1893 +/-; R2= 1908 ish; R3 = 1947
  • If the wave (C) is in place R4 = 1972 and R5 = 1993 could come into play

S&P500 Weekly Chart
Larger Image

Daily time frame:

  • I have been suggesting that from the November lower high the current decline can be counted as impulsive
  • The issue is that the down leg from the February 1 peak is overlapping hence EW wise a bottom should not be in place (The wave 5 cannot be considered completed)
  • Even though next week I expect a larger bounce, if the R1 box (10 dma; 20 dma and trend line) is breached I expect SP 500 to fail at the R2 = 1927
  • If I am wrong, this is the initial stage of a move towards T1 or even T2

S&P500 Daily Chart
Larger Image

60 minute time frame:

If the wave (5) is not in place we could have two scenarios. Once the wave (5) is in place I expect a large snap back rally that should establish another lower high.

  • Triangle:

S&P500 60-Minute Triangle Chart
Larger Image

  • Ending Diagonal:

S&P500 60-Minute Ending Diagonal Chart
Larger Image

 

Back to homepage

Leave a comment

Leave a comment