Deceleration in equities markets delaying the S&P 500 in its effort to make new rally high: Turning Points update by Andre Gratian

Andre Gratian shares his weekly technical analysis update of the S&P 500 (thanks again Andre!), and makes available intraday updates every trading day to his subscribers. His website is at Market Turning Points (always included in the sites list at right side of the page here), and he also posts regularly at SafeHaven.com (also a great source, in the list at right), and shares his updates every weekend here for our readers. Andre incorporates technical analysis with indicators, trendlines, review of sentiment, and some consideration of wave patterns, as well as cycles.

Andre uses a number of technical methods to interpret the internal strength and likely support, resistance, projections and turning points for the SPX. Let's see what Andre makes of the market movements in this weekend's update:
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December 13, 2009 Turning Points by Andre Gratian A 3-dimensional approach to technical analysis Cycles - Breadth - Price projections "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 Long-term trend - Down! The very-long-term cycles have taken over and if they make their lows when expected, the bear market which started in October 2007 should continue until 2014. This would imply that much lower prices lie ahead. As illustrated by the current market performance, this will not be a straight-down decline, but will consist of a series of intermediate-term rallies and declines until we have reached the low point. SPX: Intermediate trend. The 6+ weeks period of consolidation looks as if it may have ended at 1084. The index made a new high at 1119, but it is encountering stiff resistance which is making further progress difficult. 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 atajg@cybertrails.com.

Several weeks ago, I had loosely predicted that the SPX would reverse at about 1135 around the middle of December. That target price is still in the cards, but end of year or early next is a better time target.

The SPX remains in an uptrend, even though it has made little progress in the past few weeks. On 11/02, it touched the bottom of its 2nd up-channel from March and started another up-move which barely made a new high before turning into an extended sideways consolidation in which it is still trapped several weeks later.

Last week it made a new high by 5 points and retraced once again to the bottom of the channel where it found support and started another uptrend. Next week should tell us if it plans to continue to a new high or gives up trying.

The position of the indicators suggests that we are going to do the former. I have had a long-standing projection to about 1135, but other potential targets up to 1161 have developed. Consequently, we’ll put more emphasis on technical readiness than an actual price target to determine the top.

As you can see, the second indicator from the top appears to have given a buy signal, but its comparable indicator on the hourly chart -- as we will see next -- is suggesting a minor retracement first.

The 20-wk cycle is ideally due on 12/18, but may already have bottomed. A minor cycle low is due early Monday.

If the SPX should choose to reverse its trend instead of continuing up, this will be confirmed by a decisive daily close below the black uptrend line from July 6 and below the 1084 level. Until we do this, we are still in an uptrend.

The vertical red lines at the top of the channel on the Hourly chart show the deceleration which is taking place in the trend from July, where this channel begins. It is the second channel within a larger channel from March, and it looks as if it is about to come to an end. The index has started to trade in the lower portion of the channel, and if it cannot get back above the middle black line, it won’t be long before it challenges the lower one.

There is another channel marked in dashes which could have some relevance as support/resistance when prices touch those lines.


Note that the indicators are losing momentum and, with the second one overbought, we may have a correction which extends beyond the minor cycle low due Monday. If the correction goes on beyond December 18th and prices fall below the black and red lines, it will mean that the rally came to an end at 1119 and that we have started our intermediate correction.

The dollar index (below) appears to be in the process of reversing, but this will not be confirmed until it gets out of its down-channel completely and begins an uptrend. At best, it is still in a basing pattern and its indicator is close to being overbought. Moving a little higher, it will find resistance at the channel line, and it could reverse and do some base building for a week or two before attempting to break out of the channel. This would give the SPX the time that it needs to put the necessary finishing touches on its terminal move.

In any case, at some point the dollar index and the SPX will stop moving in an exact inverse relationship and it would be best to analyze both indices according to their own technical merits.


The total picture suggests to me that there will be a final rally to a new high before we make an important top. We are getting very close, but not quite there yet!

Andre