NEXT SHORT-TERM TOP IN SIGHT - Market Turning Points

February 5, 2012

Market Turning Points

By Andre Gratian

NEXT SHORT-TERM TOP IN SIGHT

Precision timing for all time frames through a multi-dimensional approach to technical

analysis:  Cycles - Breadth - P&F and Fibonacci price projections

and occasional Elliott Wave analysis

“By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth.  Let us not underrate the value of that hint." -- Mark Twain

Current position of the market

SPX: Very Long-term trend – The very-long-term cycles are down and, if they make their lows when expected, there will be another steep and prolonged decline into 2014.

SPX: Intermediate trend – Intermediate uptrend still intact.

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 discusses the course of longer market trends. 

I apologize to those who were looking for this newsletter last week-end.  My computer decided to take a break! 

Market Overview 

 Based on cycles which were topping around the last week in January, I had expected a short-term top to form in the SPX.  One did, and caused the biggest reversal since mid-December:  a puny 33 points decline which lasted about two days! 

The original projection for the move was around 1322.  However, after reaching that target, the index made a small re-accumulation pattern which gave a projection to 1336.  The cycle top finally came at 1333, just a little shy of the target. 

Since then, the index has made a re-accumulation pattern above 1301 which bears a vague resemblance to an inverted H&S.  From the P&F chart, we can derive several potential projections for the next move: 1346 – 1364 – 1374(?).  The first gives us the minimum target which was almost reached on Friday (1345.34).  If we remain above 1322 on the profit-taking pull-back and we start up again, the odds are pretty good that we’ll reach about 1364 on the next attempt.  Going all the way to 1374 would require exceptional short-term market strength and is, therefore, questionable. 

And when would the next top occur?  We’ll have to let the market decide that.  There are several short-term cycles clustering in the first week in March which could be either a market high or low.  If a low, then the above projections will be reached sometime during this month.  Considering the fact that we have already met the minimum projection, the odds probably favor a reversal sooner than the first week in March – unless most of February is spent building a distribution phase.  In any case, I’ll be sure to look for signs of a top starting next week, especially if we get to 1364. 

When we look at the charts, we’ll see that the market is more than ready for a top of greater consequence than anything since late November.  This is also suggested by EW analysis.

Chart analysis

EW analysis is hardly a methodology that I claim to be my forte.  After all, if Bob Prechter can’t always get it right, what chance do I have? J  But there is someone who does get it right the great majority of the time, and his name is Tony Caldaro (the Elliott Wave lives on).  One of the reasons for his continued accuracy is that he is quick to adjust his labeling when required. 

In this SPX Daily Chart, I have labeled the move from the 3-yr cycle low of early October according to his interpretation.  If correct, we are getting ready to make a short-term top, a consolidation followed by a new high, and then we could expect an intermediate term correction.  I can find nothing in my own comprehensive analysis that disagrees with that interpretation.

There is every indication that the bull market which started in March 2009 is still alive and well.  The Russell 2000 made a new all-time high early last year, and the NDX just hit its highest level in over a decade.  That is not representative of a stock market which is ready to make a long-term top.  Perhaps late 2012 will be a better time frame for that.

This weekly newsletter regularly analyzes the SPX, the Dollar, Gold, oil, and other important indices, as well as breadth and sentiment indicators.  To read the current newsletter in its entirety, please go to:

www.marketurningpoints.com

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