Should bears take a walk on the buy side? - ChartsEdge's weekly cycle forecasts, and additional reasons to consider a bullish week

Dare we be bullish for another week? The forecast from ChartsEdge for the upcoming week indicates the rally extends yet higher. This means bears - and we - must consider the long side yet again. Going higher will surprise many! and short-covering could provide some fuel. Frankly I'm rather surprised myself by this forecast. But I won't stand in the market's way if it wants up! The market went mostly sideways week-over-week - and I have had a target of 881/884 in the S&P 500. But the ChartsEdge forecast points high enough to challenge the January 6 high in that index (and perhaps place the Nasdaq 100 and QQQQ's above their 200-day moving average). In light of this bullish-looking forecast I'm going to make additional comments below. Especially since I have been among those pointing to reasons why the market should go down now (with my target identified at 780/790 in SPX). If you have a hard time accepting a bullish outlook for this week, my best thought would be don't use options, try a long-side ETF (or maybe you're into futures trading), with a stop at whatever lows we see tomorrow (Monday) ... then just see what it does through Thursday or Friday. Low maintenance and low angst. (Not an investment "recommendation or advice"!)

*Update - adding additional reasons to be open to the long side this week: The standard Point & Figure (P&F) chart for S&P 500 targets 905* (while 943.85 remains classic resistance). My C=A target for the banking index, BKX, at ~41.80 wasn't met yet. The Fed on April 29. One of my readers points out a gap at 92.5 in SPY that may want to be filled. SPX might actually want to test its 200 day MA, like the Nasdaq. Watch VIX-if under 36, it looks bullish for equities. My post on bonds yesterday - may drop, along with dollar - keep an eye on those too. *Thanks to Andre, who actually uses P&F - he states on the P&F chart that I saw, it should better be interpreted as saying, SPX looks to 905 only if it gets past 875 (so we've got to let the market say whether or not it gets aboved 875). I know of at least one trader who's decided to hold short unless and until the SPX goes over 876 - I think based on the mid- to late February highs, which makes sense on a basic support/resistance basis!

So here are the weekly cycle forecasts as generated and provided by ChartsEdge:

Little joe never once gave it away
Everybody had to pay and pay
A hustle here and a hustle there
New York City is the place where they said
Hey babe, take a walk on the wild side
I said hey joe, take a walk on the wild side
-Lou Reed,
Take a Walk on the Wild Side

So are we ready to take a walk on the "buy side"?!! Hey, who am I to argue with cycles crunched through a neural network by ChartsEdge?! We can remember that their forecasts did get a "kink" to turn more bullish with the Fed action around March 18. Maybe they'll get another "kink" and we see more bearish instead ... or maybe we take this forecast at face value and see if there's anything else out there supporting the bullish case for the immediate future. One of course is the technical indicators looking positive still, on the weekly chart of the S&P 500 as Tony Caldaro included with his OEW update (posted a bit earlier here this morning).

We may also consider the market psychology as described by Raymond Merriman, in his weekly preview comments this weekend and last weekend (both posted here, use the "MMA weekly comments by Merriman" label to find any of his comments posted here). Here's a quote from what Raymond Merriman said this weekend:

This “secondary” high that is now happening may be related to the new moon in Taurus, which takes place Saturday, April 25. Stock prices oftentimes do get a lift into the new moon, especially Taurus, which rules assets and equities. If so, look for that decline to start in earnest this week. If not, then we have to shift our focus to the forthcoming Jupiter-Neptune conjunction, a 14-year cycle which – in this market climate and with this new President – would seem more likely to be very bullish, and whose influence may already be starting. I would think that Saturn turning direct on May 16 would temper the market’s advance before Jupiter-Neptune takes root. But it is interesting to note that in previous bear markets, stock prices tended to rally into Saturn stations, according to the work of subscriber and friend Lindsay Holt, of Santa Fe, New Mexico.

I added bold for emphasis to the parts we should consider (and yes, I'm planning to listen to Merriman's May 2 webcast). My late trading mentor gave consideration to Merriman's views and cycles forecasts, and I've learned to respect them too. I also remember one of Merriman's weekly commentaries talking about a rather dream-like optimism taking hold for a while, and I'm wondering if that may be happening too. I don't know financial astrology and don't plan to decide whether to believe in it or to learn more about it. But let's face it, this perspective on market psychology can be one reason to make sure we don't stand in the market's way!

Another factor I've been considering is the Fibonacci time discussion I posted March 7 or 8 - the weekend after the March 6 low - pointing out that it was in the time window of 1.318 years after the October 2007 highs. The 1.618 year time will be in late May. It's a simple thought, but just one factor in my thinking that perhaps the end of May can be a high rather than a low.

Also, I remember looking at the TRIN on Friday and being rather puzzled that it didn't look more bearish. In fact, the 10-day moving average of the TRIN may be in bullish territory. The Stockcharts.com information on TRIN states that Arms, who created it, considered it to be a bullish indicator when the 10-day MA is above 1.20 (bearish if below 0.80). I don't consider myself adept at the TRIN yet, however - so anyone who is, you are very welcome to comment on how you view this.

The forecasts for equities and gold both pushing upward probably has bearish implications for the dollar, with corresponding implications for other currencies. Therefore, this may also help propel $XJY on its chart higher (as I discussed in a post here yesterday). Currency traders may want to keep an eye on this (and I know there are some new ETF's for some currencies too).

Let's think about the trendlines too. As I posted yesterday or the day before, many are looking at trendlines that show the equities markets "should move down" now. These include the Chart of the Day trendlines, and the PTV-Investing blog's work with Gann angles and timing. My own trendlines, inartful as they are, seemed to have been broken to the upside (which can happen with a 4th wave for what it's worth). If other analysts' trendlines get broken to the upside, that would be a reason to expect the markets to push higher.

At this point I don't have much to add regarding Elliott Wave or other constructs about "why" the market should move higher from here. All I can really point to, along with the ChartsEdge weekly cycle forecasts you can see, are technical indicators like the McClellan Oscillator and Summation Index, the indicators on Tony's weekly chart of the SPX, perhaps the TRIN, and for that matter, Terry Laundry's T Theory updates which haven't shown the market needing a move down yet. It's true that the cycles "crunched" through ChartsEdge's neural net don't always "work" so we'll have to keep a close eye early next week. On the other hand, ChartsEdge's forecasts were a big factor in why I remained bearish during the swing highs in February that turned a lot of people bullish - and was I glad to be short when the market rolled over and kept dropping into March 6! Now ChartsEdge is pointing higher for another week, when "everyone" seems to be bearish. So, now more than ever - let's be careful out there, and not worry about needing to explain it or having it "make sense." If your constructs don't fit where the market is going, set them aside and follow the market. That's how surfers do it, and we will too!