Is the Rally Ending? Market Turning Points

January 22, 2012 Market Turning Points By Andre Gratian IS THE RALLY ENDING? 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, but short-term top… or more, is now very close. 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. Daily market analysis of the short term trend is reserved for subscribers. If you would like to sign up for a FREE 4-week trial period of daily comments, please let me know at ajg@cybertrails.com Market Overview Last week, the rally in the stock market got a reprieve. Two key indicators which were giving bearish signals did not follow through and turned back down. This probably means that an intermediate reversal is not immediately upon us and, even if the SPX makes a final high around 1322, it may be followed by a distribution period before a significant decline begins. Next week should bring about a short-term top, and these are some of the reasons why: -- The Point &Figure chart of the SPX is giving us several projections which converge between 1321 and 1324. -- This is a resistance level where several important trend lines are intersecting, indicating that at least a pause in this area is due. -- The hourly indicators are suggesting that this might be more than a pause, and a short-term correction instead. -- In addition to the two contrary indicators mentioned above, UUP (the dollar ETF) is telling us that it probably needs some additional short-term consolidation. But the P&F base that the dollar has formed over the past few weeks suggests that it can go up to about 90 (which would be about 25 on UUP), and that this is only a pause in an intermediate uptrend. -- The SentimenTrader is flashing a warning which is normally given at important market tops. -- Cycles are topping in this area. -- A recent article by Ed Carlson (Seattle Technical Advisors) published on Financial sense mentioned that several George Lindsay indicators were converging on January 23 (next Monday). The above, in conjunction with an overbought daily MSO and negative divergence in the daily A/D indicator, is saying to the bulls: “Be cautious!” Chart analysis The Daily SPX Chart illustrates the strength displayed by the index since mid-December. In addition to positive seasonal influences, daily bullish economic reports have done nothing to reverse the uptrend, but several cycles which are topping in this area are probably the real reason for the market's steady upward push. Their influence should become less of a factor starting next week. I have drawn on the chart several trend lines that should offer resistance to the price as it tries to move higher. The principal one is the dark red one which starts at the October 2007 top and connects with the 1370 high, in May of last year. 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 Click on “Newsletters” (Allow about 30 seconds to open)