From Safehaven.com:
The market indicators are a mixture of positive and negative signals. They probably exemplify a market which is in an incomplete corrective mode. The faction which eventually gains dominance will determine the direction in which the market emerges from this correction.
Near-term, a favorable resolution of the political crisis in Washington will probably favor the bulls, but that may not mark the end of the correction.
Patience! This too will pass!
From Safehaven.com:
The rally which started last Monday at 1296 was not able to generate enough momentum in the weekly and daily indicators to confirm that an important uptrend had started. I had voiced my concern about the weekly indicators before, and in the last newsletter, in reviewing the weekly chart, I stated that “Neither the MSO nor the MACD has given a confirmed buy to the uptrend which started at 1265.”
By the end of the week, the daily indicators – especially the breadth indicators – were giving a non-confirmation of the uptrend with some very visible negative divergence appearing in all time frames.
My Thursday Market Summary stated the following:
“With the kind of weakness which is beginning to show in the weekly and daily indicators, there is no guarantee that the various projections will be reached, and we should be very cautious when a projection is reached and we start reversing in earnest, especially after we break trend lines (any trend line).”
The base pattern that was created on the Point & Figure chart around the 1296 low gave a potential count to 1402, which was divided in various phase projections. The phase projection that the SPX was trying to attain on Thursday and Friday was about 1353. After reaching 1347, it could go no further and started to trade sideways. By the end of the day, on Friday, it started to trade outside its trend line. Strength in the QQQ, which made a new bull market high on Friday, suggested that the SPX might follow, since QQQ has a strong tendency to lead. It did not!
In the afternoon, the announcement that the budget talks had come to an impasse is not likely to be received very well by the financial markets, and the second phase of the rally from 1265 which started at 1296 has undoubtedly come to an end. This could be averted if some renewed hope for a deal emerges over the week-end, but since the indicators are calling for a correction, what happens may only be a matter of degree.
Where does that leave us? One of my assessments was that we had been in an intermediate correction since the February high which was taking the form of a diagonal triangle. I thought that it had ended with the 1296 low. It is now likely that it has not and my current diagnosis is that the index is now in the process of completing the triangle pattern. I have reasons to believe that the bull market has not yet come to an end.
Chart Analysis
Figure and Then Point Your Way to Major Profits by readtheticker at Safehaven.com:
Why use Point and Figure Charts?
Your stock went up $1.00 on Monday and continued down $.63 on Tuesday. It went back up $1.40 on Wednesday while falling down $.30 on Thursday. When you take a look at the intraday charts you see something frustrating and erratic. No price at which to sell is clear. If only there were a method to eliminate some of the noise perhaps the stock trend would be somewhat clearer. For this, many turn to point and figure charting, because it aids in reducing noise and elucidating market tendencies. Point and figure charting displays the interplay between these two fundamental forces of the marketplace, while at the same time not tracking relatively insignificant changes.
From Safehaven.com:
Investors may have been at a loss to explain the panic that befell financial markets at the end of last month, but one man saw it coming from a mile off. Financial forecaster Martin A. Armstrong predicted the beginning of the current jitters to the very date, 27 February – and it’s just the latest in a long line of spectacular predictions.
From Safehaven.com:
Last week, the stock market got into the spirit of Independence Day early, and created its own fireworks! In my last article, I concluded that the bulls could not declare victory just yet, and it must have struck a nerve because, starting on Monday, they decided to show me! The SPX was up strongly every single day, closing on its high at the end of Friday with a 71-point ramp for the week.
That may be just about all you get for now! Instead of following through next week, the odds are that equity indices will have to do a little consolidating before moving higher. We’ll find out as early as Tuesday. After that, another limited move up before a deeper correction into the middle of the month, and the 9-mo cycle low. My thinking was that the SPX was making a correction in the form of a triangle. After last week, I am not so sure, but it could still happen. We’ll have to see what the entire pattern looks like after mid-July.
There are some other factors which support my view: the weekly chart has not yet made a confirmed break out, and both the chart pattern and the indicators need to pull back before they can extend their moves.
The UUP (dollar ETF) may be making a triangle consolidation pattern before going to a new low. It looks like it’s ready to embark on the “e” wave, which would temporarily send the market in the opposite direction.
The VIX looks like it’s ready for a short-term rally; and then there is the MSCI, which responded to the market rally with a big yawn. That index has a pretty fair history of accurately calling the market moves ahead of time. There are more indications, but this is enough to show that I have some good reasons to think that, whatever pattern is made in the end, we may have to wait out the first half of July before resuming the rally.
Let’s look at some charts!
From Safehaven.com:
Even though the SPX closed 3 points lower than the previous week, it was the first time since the correction started at 1370 that the SPX and other equity indices did not make weekly lows, and this could be significant. Even the XLF, the weakest of them all, held its ground! However, it will take another week or two to determine if SPX can hold above a low of 1258 and start reversing its downtrend.
As we will see, the odds that it will are fairly decent. The stock market has a history of correcting into late June or early July. In the past two weeks, a nest of cycles – including Martin Armstrong’s 8.6-yr economic cycle — made lows, and the next cycle which could affect the market is not due until the middle of July. This should give the market an opportunity to start an uptrend so that it doesn’t get shoved down to a new low by the bottoming 9-mo cycle.
Our “White Knight” (the SentimenTrader) is still giving strongly positive readings. Inaddition,two other indicators that were giving us concern, the Summation Index and the “Black Knight” (NDX:SPX), appear to have bottomed and have started to turn up. Also, the SPX and QQQ may both have started a pattern of higher highs and higher lows. If they prevail and starts to gain some upside momentum, it would be a strong signal that a reversal is taking place.
From Safehaven.com:
So what is likely going on now? The market spent most of the time last week in a range and chopped up traders, when we see price action like that, its classic of a 4th wave, potentially a triangle or flat pattern.
So with that in mind, the idea of a 4th wave of smaller degree from the highs at 1270SPX started to make sense, late last week, and staying under 1280SPX keeps the trend lower and potentially seeing under 1248SPX from here to complete a 5 wave decline as well as a larger expanded flat pattern.
From Amazon.com (pg 48):
Many traders attempt to predict the market and look for prices to follow. Great traders understand the market’s language and follow along…you can best apprehend the market’s messages by attending to your own volatility.
There is a myth among beginning…traders that consummate professionals check their emotions at the door and operate under strict logic and reason. Is it possible to shut off your feelings in such a manner? Would this even be desirable?
…A number of studies have investigated individuals with brain lesions who display what would seem to be a trader’s dream: Their reasoning mind remains intact, even as their capacity for feeling is blunted. The result is not a superrational, intelligent being, such as Mr. Spock from the old Star Trek series. …
Why is this? It appears that feelings are one’s guide to the value and the meaning of events. …
…the successful trader feels the markets, but does not become lost in those feelings. Emotions are information, no less than a wide-range bar on a chart. Indeed, a strong emotion can be thought of as a personal volatility breakout. Just as an experienced trader becomes exquisitely sensitive to the patterns emerging from the tape, traders who know themselves will attend to their own patterns. ….the real market you’re trading is the market called Self.
Don’t ignore your emotions. Observe them. Use them as trading filters and trading signals:
The more giddy you are with success, the more likely you are to do something wrong—perhaps an ill-adivised entry, or perhaps staying in a trade too long.
The more you feel dejected and unworthy, the more likely you are to miss a trade you should have taken.
The more you disbelieve what you see the market doing, the more likely you are to trade counter-trend when you shouldn’t, or stay in a trade when you should immediately exit at the market, or to fail to enter a trade you should be entering.
So be aware of your emotions, have trading rules that determine what you will do in response to those emotions, and then do what the rules say, not what your emotions would have you do.
From Safehaven.com:
Any new stock bear today has to be cyclical. The US stock markets (as measured by the flagship S&P 500 stock index (SPX)) soared 102% higher between March 2009 and April 2011 in a powerful cyclical bull. So a cyclical bear is certainly due next when the past-couple-years’ bull inevitably gives up its ghost at some point. Is that time now? Maybe, but we don’t have a high-probability new-bear setup yet.
From Safehaven.com:
Reading the technical tea leaves results in the picture of a market which may soon be ready to have a short-term uptrend, but which will probably have to spend some additional time completing an intermediate correction that may have started with the 1344.07 top in mid-February. This is the thinking of Tony Caldaro, and I believe he is right. That is the date on which the financial index made its recent high. The move to 1370 was premature, and this why the market needed additional corrective action.
There are some cycles bottoming in the Fall which may help the indices to complete their intermediate correction in that time frame, followed by a final bull market top in 2012.
Strategesis 