Current Position of the Market
SPX Long-term trend: Uptrend continues with a serious loss of upside momentum in
weekly indicators.
SPX Intermediate trend: Correction over. May be heading for about 2500, or fall slightly
short of it.
Analysis of the short-term trend is done on a daily-basis
with the help of hourly charts. It is an important adjunct to the analysis of
daily and weekly charts which discuss longer market trends.
Higher highs still likely
Market Overview
The wave of profit-taking which occurred over the past 10
days was pretty much confined to the overbought tech sector which, by the end
of the past week had pretty much stabilized. The DJIA essentially ignored the
whole thing and went on to make a new all-time high. SPX, which includes many
of the high flyers, underwent a consolidation/correction that appeared to be
complete by Friday’s close. If so, it should now be ready to progress to its
next target of about 2455. This projection was first determined by the
congestion pattern established just above 2330, and it should be confirmed if
we can resume the uptrend on Monday.
The market action of the past week has done nothing to
change my original estimate that an intermediate top is near but still ahead
of us. The Weekly chart continues to be in an uptrend with negative
divergence displayed by its indicators. The same can be said for the daily
trend. A positive opening on Monday morning would most likely trigger a buy
signal on the hourly chart and generate another attempt at reaching the
projection level mentioned above while, a the same time, extend the life span
of the uptrend.
Analysis: (These
Charts and subsequent ones courtesy of QCharts.com)
Daily chart
SPX continues to be confined to the second quartile of a
large, intermediate (blue) channel which originated at 1810. The
profit-taking of the past few days has created a consolidation pattern that
can serve as a platform from which it can propel itself to a new high next
week. This push should be limited to about 2355, complete the minor uptrend
which started at 2353, and be followed by another minor corrrection. While it
is possible that this will be the final high, it is more likely that there will
be one more high after that.
There is another factor which has limited the upward
reach of the index. A trend which started at 2084 formed another, less
important (greenish) channel which concluded at 2400, but the correction
which folowed was not able to make a significant exit out of that channel
and, since April, price has gyrated within a small range around the bottom
channel line.
The action of the index described above will make it very
simple to determine when it has made a top. The next correction which fails
to find support at the larger channel’s mid-point (dashed blue line) will
confirm that the high was reached and that an important correction has
started. Until this happens, we can assume that the index will continue to
crawl upward, within the parameters mentioned above.
The oscillators at the bottom of the chart are also
telling us that the index is still in an uptrend, and will remain so until
they have all turned down and become severely negative. The most likely
scenario will be for the 2355 high to be followed by another minor
correction. Only until after the next rally ends (2480-2500?) will the
uptrend from 1810 be likely to end.
(Click to enlarge)
Hourly chart
The 2446 projection was met with some expectation that it
would be followed by a move to 2453, but this was cut short by the spontaneous
selling which took place in the tech sector. After an a-b-c correction, we
are now set to move to that slightly higher target to complete the move which
started at 2353 – if we can get past the minor downtrend line and above the
former peak at 2334.
On Friday, there was a little spurt of buying at the
close which augurs well for a follow-through on Monday morning. The A/D
oscillator closed on its best level of the day and, along with SRSI, closed
positive. If we can get CCI to follow their lead at Monday’s opening, we
should be on our way to about 2455.
(Click to enlarge)
An overview of some important indexes (daily charts)
The odds that SPX will make a new high are pretty good,
considering that DJIA, NYA (top left and center) and IWM (bottom center) did
so last week. XBD (bottom right) almost did. Even TRAN (bottom left) made a valiant
effort to do the same, but came up short. There was still too much pressure
on the techs for QQQ to participate in the bullishness, and it may be done,
along with the FAANGs for what’s left of the uptrend.
(Click to enlarge)
UUP (dollar ETF)
UUP was due for a bounce, but its rally looks limited by nearby overhead resistance,
and more basing action should be necessary before it is ready to challenge
the top line of its corrective channel.
(Click to enlarge)
GDX (Gold Miners ETF)
If GDX can remain above 21 for the rest of its correction, it will have
built a nice base on its P&F chart from which to launch its July rally.
This is when the next 10-wk cycle should bottom, but there’s a cluster of
less important cycles due to make their lows before the end of June which
could soften the impact of the weekly cycle.
(Click to enlarge)
Note: GDX is now updated for subscribers throughout the day, along with SPX.
USO (U.S. Oil Fund)
Is there any hope for USO to get back into a meaningful uptrend?
Perhaps, but I would not hold my breath until it does. The oil glut continues
and the action of oil stocks is saying that it’s not going to end anytime
soon!
(Click to enlarge)
Summary
Although SPX was more affected than the Dow (which closed
at a new high on Friday) by the tech correction it, too, is expected to
continue its uptrend for a while longer. I believe that the 20-wk cycle, due
to bottom in August, will put an end to the rally from 1810 and trigger a
multi-month correction. This probably gives SPX about a month to make its
final high between 2480 and 2500 before rolling over. Nevertheless, let’s
keep a close watch on its action after the next target of 2455 is reached is
reached.
