A Reversal Is Due - Market Turning Points

January 15, 2012 Market Turning Points By Andre Gratian A REVERSAL IS DUE 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 Deceleration in the SPX is becoming more and more obvious on the Point & Figure chart and in the hourly chart. This, in concert with overbought daily indicators, is a clear warning that we are approaching the end of the trend which started at 1159 on 11/25, and perhaps of that going back to 1075 in early October, as well. Last week, the SPX made a triple-top on its hourly chart (only a double-top on the daily chart), after barely overcoming the 1292 high of Dec. 27. Is this it? Or is there more to come? Since, as of Friday, there was no clear sell signal, it is possible that we could go a little higher or, at least, continue to work a little longer at expanding the top formation. On the P&F chart, the index has already formed a pattern which looks very much like distribution, with trading confined to a 20-30-point range. If prices fail to break out of this range on the upside or, if there is a break-out of a few points with an immediate retracement into the range, it will be a sign that buyers are exhausted and that sellers are getting the upper hand. Should this happen, we could identify everything above 1266 as a possible top formation which already measures nearly 100 points across (P&F). That means that if that level is broken, we are looking at a potential 100-pt decline in the SPX. That would not be enough to put an end to the intermediate trend which started at 1075 unless, after a re-distribution level is formed, it becomes a possibility if the decline continues beyond 1159. Let's not speculate, but take it one step at a time and concern ourselves first with the topping formation, and then with the ensuing decline. We'll start by analyzing the developing top formation on the Daily SPX Chart. Chart analysis Don't expect to see a potential 100-point top on this chart. It's the business of the P&F chart to show that. What we do see here, is a larger trend which started at the beginning of October (3-yr cycle low) from 1303, which is delineated by the purple channel lines, and which, as of last Thursday, was still making new highs. Within that larger uptrend, there are several smaller ones, beginning with a spectacular four-week rally from 1203 to 1292 whose high was only bested last week – barely! Since then, the trend has been essentially sideways having, at best, a vague resemblance to an inversed Head & Shoulders pattern. If it is, we should only get a minor pull-back to the neckline (not shown) and then resume the uptrend. The SPX could also be making a broad consolidation pattern before moving higher. 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)