Archive for the technical indicator Category
In previous commentaries we’ve talked about how the 6-year cycle is scheduled to peak around Oct. 1. That now appears to be all but certain following the last few trading sessions. Although the cycle has a 1-2 week standard deviation (plus or minus), it appears that it peaked on schedule last week and that the stock market has lost the last remaining cyclical support it had throughout most of September.
S&P 500 Stock Index; Daily bars — Indicators on bottom of chart are of my own proprietary design
Based on the Elliott Waves, trend-channel and support/resistance analysis, and my interpretation of my indicators (involving not just this chart, but also the monthly, weekly and 4-hour bar charts,) the most likely scenario appears to be that the corrective action since the low in early August is not yet over. In fact, the $SPX will probably test the 1232 high it made on 1 Sep 2011.
Gold futures (trading symbol = GC); Daily bars (Click on chart for larger image)
The technical indicators shown on the chart are of my own proprietary design. My conclusion is based on my interpretation of those indicators, Elliott Wave analysis, support/resistance and trend-channel analysis, and the strength of the uptrend in Gold.
Although the long-term economic trend is contracting, we’re currently passing through a small window within the yearly Kress cycles which began at the end of 2008 when the 6-year cycle bottomed. The bottom of this important cycle lifted a sufficient amount of downward pressure from the financial market to allow for a temporary reprieve in the de-leveraging process which began in 2007 with the credit crisis. The nominal force behind the credit crisis was the metastasis of toxic debt but the impetus behind it was the long-term yearly cycles which compose the Grand Super Cycle of 120 years and is scheduled to bottom in late 2014. The final “hard down” phase of the 60-year component cycle, for instance, began in 2007-08.
With the bottom of the 6-year cycle in late 2008 and the corresponding “good years” of 2009-2011, individuals and institutions have had an excellent opportunity to get their balance sheets in order and expunge debt from their lives as much as possible. The 6-year cycle is scheduled to peak in October this year but as Mr. Kress has emphasized, it’s a possibility that the weight of the long-term 30-year, 40-year and 60-year cycles could end up foreshortening the peaking process before October. It’s important therefore to be prepared for the eventual end of the Fed’s loose money policy and the closing of the 6-year cycle window, the effects of which should be felt within a few months.
The VIX is calculated by averaging S&P 100 Stock Index at-the-money put and call implied volatilities. The availability of the index enables investors to make more informed investment decisions. Going over the VIX history along with the S&P 100 OEX index it is quite evident that all of the spikes in volatility accompanied market downturns and significant events that affected the market.
For the past two weeks, I have stressed that oil, gold, and the dollar were reaching significant Point & Figure targets. It turned out that these projections were only off by a fraction. Here were the projections, the actual price reached, and Friday’s closes.
Oil (WTIC) Gold (GLD) Dollar Projections 115 153-154 74 (P&F counts) 154-156 Reversal price: 114.88 (5/2) 153.61 (5/2) 72.69 (5/4) Price on 5/6 97.33 (lo 94.77) 145.30 (lo 143.47) 74.92 (hi 74.93)
I also had a target of 1370 for the SPX. The high on 5/2 was 170.58, before the correction started. So far, the low for the decline has been 1329.17, and it closed the week at 1340.20.
I am supplying these figures for a couple of reasons: first, to illustrate the immense value of using P&F analysis, and second, to show that these wild price swings may indicate that the stock market is at an important juncture.
Based on the accumulation pattern that was created during the correction into mid-March, there are higher potential P&F targets for the SPX. Also, that correction formed a H&S configuration which has been validated by a clear break-out above the neck line. The normal projection for this H&S pattern closely matches the more liberal count taken across the P&F base.
The pull-back which occurred last week could simply be a deeper than normal return to the H&S neck line. However, the severe corrections in commodities suggest that this is more than a minor consolidation, and it creates some doubt about the ability of the SPX to reach its higher targets.
By the same token, we will see that sentiment is still not suggesting that we are at an important top. This leaves us with a greater than normal challenge to determine the future course of the market. Let’s turn to the charts and see if we can derive some technical clues which will clarify its current position.