Market Overview

A Little More Consolidation? Market turning points

December 11, 2011 Market Turning Points By Andre Gratian

A LITTLE MORE CONSOLIDATION?

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 – The current action suggests that a wave “C” from 1075 is underway.

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's headline was : “WAVE C DUE FOR A PAUSE”. The SPX obliged by surrendering 36 points into Friday morning, after which it rallied for the rest of the day and closed near its high. So! Are we ready to push ahead with Wave C?

Perhaps not right away. Although Friday's action was bullish, and the index closed near its high of the day, it's possible that the consolidation is not quite over. At best, this would be wave 1 of the new uptrend, with a wave 2 pull-back before the SPX is ready to surpass its 1267 high. At worst -- and cycles seem to argue for this scenario -- the consolidation could extend for another week or so before the index is ready to challenge its short-term high.

Over the intermediate term, it remains likely that we are in a wave “C” rally from 1075, and that we have completed its first phase at 1267. But if my instincts are right, Friday's rally may only be the mid-point of the consolidation. If so, that would mean an extension of range-bound trading, followed by the genuine resumption of the wave “C” uptrend. 1231 is a strong support level and is not likely to be broken.

It sounds as if I speak of wave “C” as if it is already etched in stone. Actually, I have learned to keep an open mind about structure and to “go with the flow”. If we have a nasty decline after completing this “wave C”, then we can be fairly certain that the bear market has resumed. If not, I'll have to re-adjust my thinking.

The near-term trend will be decided by what happens on Monday. A P&F projection is looking for a move to 1260-1261, followed by a pull-back with 1231 likely to hold.

Chart analysis

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Posted-In: Technicals Previews Pre-Market Outlook Markets Trading Ideas

 

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