Time For a Pause - Market Turning Points

December 25, 2011 Market Turning Points By Andre Gratian TIME FOR A PAUSE 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 and, after a short consolidation, has resumed its uptrend. 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 In the last newsletter, I looked for a resumption of the rally and, once again, the market obliged! After a final dip to 1203 last Monday (my projection for a low on the SPX was 1200-1205), the index took off and closed the week at the high of the move, rallying 62 points! My Point & Figure analysis had indicated an initial pause at 1251, but when it became obvious that the index wanted to go higher, 1263-1265 came into play. Since the SPX closed at 1265 on Friday, we have to assume that the move is probably done, although the momentum may cause it to spill over into some weak count up to 1270. This will be determined when the market resumes trading. What normally follows the realization of a projection, is a wave of profit-taking which causes temporary supply and a pullback in prices. I expect a near-term peak to be reached, perhaps as early as Tuesday. Correction from that level should be short-lived, but could last a few days. If I tried to forecast a retracement level at this time, I would be guessing. I will not be able to give a correct estimate until the move has been completed. Of all the indices, the DJIA has had the strongest rally. It overcome its October 28 close by thirty points and its December close by nearly a hundred points. This may encourage some additional buying after the holiday. If so, the SPX would follow suit and rise above its December intra-day high of 1267. This is why we need to wait until Tuesday to put a price on the rally top. Last week's market action is bullish in itself, but possibly even more bullish is that, by overcoming its October and December tops, the DJIA is giving some credibility to the potential inverse Head & Shoulders pattern which formed over that time frame. (We'll analyze this and other technical factors next, in the Daily Chart of the DJIA.) My projection for the entire rally from 1075 is at least 1293. If this turns out to be the top of minor wave 2, as is expected by many EW analysts, it should be followed by a serious decline. If it is not, the appraisal of the longer-term structure will have to be revised. Chart analysis We'll start by focusing on two important channels which will be vital in determining the sustainability of the DJIA uptrend. First, is the green channel, which delineates the trend from March 2009. In the decline from the April high, the index briefly violated the bottom line of that channel, but subsequently had a good rally which took it up to the channel median. After pulling back from that level, the DJIA collected itself and is now attempting another move beyond the median resistance. At best, the entire pattern from the low remains neutral until it can do this successfully. 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)