Get the watch on for a pullback at these levels and projections: Turning Points update by Andre Gratian

Here's Andre Gratian's weekend report with his technical analysis of the S&P 500 (SPX), sometimes looking at related markets like the Nasdaq (QQQQ) and the dollar. He takes an objective approach using classic technical analysis together with cycles, Fibonacci work and some thoughts about wave counts, in his Turning Points reports. Andre's website is at Market Turning Points (always included in the sites list at right side of the page here). He provides his weekend updates also to his subscribers, and on occasion at Safe Haven as well. And of course his intraday updates and comments to his subscribers.

I'd like to apologize to my regular readers for my coverage at this blog being lighter lately. All I can say is, some amazing and sometimes crazy things have happened to my schedule! (Including today a very kind invitation for supper from neighbors who ended up keeping me for around five hours, quite unexpected but there you go - should be considered a very nice thing on an Easter holiday I suppose.) I'll endeavor to "pick it up" again over the coming days (keep the goodwill coming, guys!). Here's what Andre is sharing this weekend.

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April 3, 2010
Week-end Report
Turning Points
By Andre Gratian

We’ll start our analysis with the weekly chart of the SPX. Instead of the Andrews pitchfork -- which I thought was a little artificial -- I have created a channel for the current longer-term trend which is more realistic. It’s outlined in green trend lines. You can see that the mid-channel line was support for the July low and, since then, the index has traded in the upper portion of its channel and is hugging the top trend line. This is a sign of strength which tells us that the intermediate-term trend is safely up for the time being.

Just as the bear market downtrend was delineated by the red channel lines, and the end of the decline was confirmed when the index reversed outside of that channel, the current green channel tells us that the long-term trend is up and will continue to be up until the index comes out of it. Obviously, that will take some doing and some time! This is the reason why I expect this trend to continue well into 2011, and perhaps beyond.

The indicators are also showing strength. Although there is some evident negative divergence developing in the MACD, that index has just given another buy signal and the MSO (below) is still rising with nary a sell signal in sight.


While there does not appear to be any imminent weakness in the intermediate trend, it’s only a matter of time before it appears because of the dominant cycles that lie ahead. I have positioned these cycles on the chart so that we can see how they will affect the market for the rest of the year.

The first one is the next 17-wk cycle which will bottom just ahead of the 2-yr cycle. That combination will start putting pressure on the market before too long but, judging by the position of the indicators, it could still be weeks away. That does not mean that we cannot find a short-term top fairly soon. We are nearing our projection of 1290(P&F) - 1204(Fib.) where we also find resistance from the top of the green channel, and two trend lines drawn from the top. But finding a top is not the same as starting a decline. We may find a top in the next few days, but not start the decline in earnest until after it has been tested successfully in May, or we may go higher, first.

Obviously, the low of the correction will come at the end of the year when 3 cycles combine to make their lows in the same time frame. After that, we should start another leg of the bull market.

We’ll now move to the daily chart to better assess what lies immediately ahead. On this chart, you see the same long-term red and green channels, but I have added others to delineate the shorter trends. The blue channel encompasses the move from March 2009 which is slowly weakening by beginning to roll over. Again, this could take a while. We will look at the last segment of that trend on the next chart in a close-up view.

Above, you see the two resistance lines from the top, and also the high side of the target for this move which I have placed at 1204 (pink line).

The cycles, up to the 2-year low are also shown on the chart.


The indicators have given a preliminary, unconfirmed sell signal. We’ll take a closer look at those on the next chart.

Below is a detailed view of the daily chart. It’s blown up so that we can better see the last phase of the move which started at 1040 after it found support on the 200-day EMA at the low of the 9-mo cycle.

Let’s concentrate on that segment. The steepest channel is in black, but the purple channel may be more indicative of the short-term trend. Look how the lower trend line corresponds with the 50-day MA. Any pull-back is likely to find support on that trend line, and when that is broken, the blue trend line will next provide support. So it appears that when the market tries to reverse, it will have a tough time starting a significant decline, and this is the reason why we should not be in a big hurry to expect a turn of the intermediate trend (blue channel), and why those analysts who don’t see the market making a final high (for this year) until May, could very well be right.


The 1192 and 1204 targets are marked with pink horizontal lines. These levels could be reached as early as next week, and since these are important projections, the odds are that we will get an immediate nearterm reversal when they are touched. The lower target could turn out to be of less import than the higher one, but it’s a fair bet that the rally will stop in this general price frame.

Any attempt at moving higher from here will be encountered by negative divergence in the indicators, and that will be the time to watch for a reversal and a break of the black trend line.

Andre