S&P 500 technical analysis shows underlying strength despite cyclic hurdles: 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.

So - Here's what Andre is sharing this weekend.

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March 21, 2010 Turning Points - Weekend Report 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 The weekly uptrend of the market appears to be safe for the time being, so let’s focus on the Daily chart and the short-term. On Wednesday of last week, the SPX met its 1169 P&F target, and that stopped its rally. On Thursday The A/D indicator gave a warning that it might be ready for some consolidation -- which was consistent with the short-term cycle lows which lay ahead, but it was unclear whether there first would be a move to the P&F extension of 1176, facilitated by options expiration on the next day. The attempt at moving higher at Friday’s opening failed again at 1169, and the index sold off, closing lower and giving a near-term sell signal. This could turn into a short-term consolidation of about 10 days duration. There are two short-term cycles ahead. The first (37-40 TD) should bottom early next week. The next (25-27 TD) is due around 4/1. The extent of the consolidation will depend on how much effect the first cycle has on the market, both in its final down-thrust and its subsequent up-thrust. We could be facing the same action as that which took place in late Sept. early Oct. when the same two cycles made their lows in the same configuration (see chart). Emphasis on “could”, because patterns seldom repeat themselves exactly. The daily indicators do not suggest that an important top has been made. The pattern of deceleration followed by negative divergence came on the (A/D) bottom indicator which I created several months ago, and continue to refine and better interpret. Neither of the upper two indicators is in a position to give a significant sell signal either. All three are simply anticipating the short-term cyclic action. After the cycles have made their lows, we should attempt to resume the uptrend and will probably do so successfully since we have higher projections that have not been met. For further refinement of the short-term trend, we’ll look at the Hourly Chart. The minor pull-back of the SPX has brought it outside its blue channel down to its 50-hr MA -- which happened to correspond with the P&F count of 1156 -- and causing a bounce. In doing so, the index has made the longest consolidation since it began its 3rd wave move at 1086, and it should extend at least into the near-term cycle low. But if it continues the consolidation into the next cycle bottom around 4/1, we will have formed a bona fide wave 4 and should be able to resume the uptrend. That’s one possibility. The other is that the first cycle is strong enough when it reverses to take us to new highs right away. Indicators should bottom over the next day or two, in preparation for a rally. Its strength cannot be measured at this time, but if this is a wave 4, it’s a good bet that it will extend into the next cycle low. One indicator which points to that possibility is the sentiment indicator (at left, courtesy of SentimenTrader) whose long term condition is fairly negative and which might have to improve before we are ready to move higher. On the other hand, the chart of GS shows less weakness than the market and looks ready to make new highs. Since it is a market leader, if it does, it could be pointing in the direction of the next move. A little more time is needed to clarify the short-term market position. Andre