It is wise to be a bit cautious here as SPX is now reaching downtrend line above...also if the pattern from early 2004 repeats, there could be one more larger down move ... and also I don't like the negative divergence we have been seeing from the MACD and RSI for a long while now...however, I have to agree that seasonality is on the side of the bull. <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=894871>
Hi Lynx, Nice chart, ty. I do wish more people would post charts... I'm always cautious with the SPX, it hardly ever leads (but did today), just likes to spoil the party. Like last friday. The market was rallying nicely, all week, and then the SPX has a failed 5th wave. Virtually put the entire market on hold for nearly a week. Setting up all these negative momentum divergences. Then today, just when the market was ready to break, the SPX sets up a positive divergence off the lows. The scalpers started buying, the sellers started watching, and next thing you know, there's a stampede. Gotta love this business I believe you've made a very keen observation. The SPX could run into that channel and have trouble. It looks like it's around 1240. I just posted, the SPX was last to confirm the new uptrend. It was last to make a new high during this rally. The NDX has already made new bull market highs and the NAZ is only 1% shy. The DOW is only 1/2% away from it's July high. But the SPX is more than 1% and may again be the spoiler. Something to watch for sure. TY
All intermediate trends have been confirmed up: NAZ/NDX/DOW/SPX/SOX. Expecting wave iii to have a 1.618 relationship to wave i, or better (see updated chart) SPX = 1345, NAZ = 2560 and NDX = 1835. Guess we have a ways to go yet.
yes i agree...this action is tough to decipher...while the NDX has led the way to a new high (and COMP is not too behind -- about 1% to go) Russell 2K is left behind this swing -- it is about 4 to 5% lower from its previous peak. I thought smallar stocks will lead the way in a broadbased end-of-year rally -- there is still more time..let's see whether it can pick up...
If you recalll, at the start of this rally the NDX trailed the NAZ. Indices do take turns with leadership ...
I posted this in my blog today, thought it might be appropriate here in this thread. http://spaces.msn.com/members/caldaroEW/ LONG TERM: bull market We have been in a major bull market since Oct. 2002. Many perceive this three year advance as a counter trend rally in an ongoing Super Cycle bear market that started at the 2000 top. I disagree with that perception for basically two reasons: First...the Nasdaq declined 89% between 2000 and 2002. I have never seen, in the history of the stock market, a decline that severe not end a Super Cycle. If anyone knows of an instance when a bear market continued, please advise. Second...bear market counter trend rallies are always three waves, ABC. We had three waves up from the bottom: Oct. 2002 - Jan. 2004, but the market only corrected from there and we've been impulsing upward, in five wave patterns, ever since the end of that correction in Aug/Oct 2004. In fact, all major indices have since exceeded the highs of Jan. 2004. Thus, we are in a subdividing fifth wave up from Oct. 2002, and this is a bull market. If you review the chart posted for the SPX, you will see the same exact EW count I have had since the bull market began. I have only updated my charts as the completion of waves occur. Specifically, we are currently in wave V, and it has been subdividing into five waves 1-2-3-4-5. Wave 3 is also subdividing into fives waves i-ii-iii-iv-v. We are now in wave iii, of wave 3, of wave V. After this uptrend ends, the market will correct in a wave iv, followed by another uptrend like this one, to end wave v of 3, and thus ending wave 3. We will then witness a significant correction, wave 4, only to be followed by a major and last advance wave 5, which will end wave V and the bull market. Simply stated: there will be two more major uptrends, like the one we are experiencing now, before the bull market ends. How can I be so sure? Objective EW has been functioning like clockwork for the past 20 years. I backtested it, for the entire history of the stock market in the early 1980's. That's how I knew it worked then. And, that's how I know it still works now.
Unless the terrorists nuke NYC, ect., with a dirty bomb first. Or some other major terrorist activity hits the USA... Then the waves will be going downwards in a hurry...
If one is to believe the premise that the EW graphically displays investor psychology, (the "collective mind" of Wall street). Which is in itself is a discounting mechanism of future events. At this point, we can safely state nothing like that is on the horizon, yet. However, there are diagonal triangles and failed fifth waves to consider. But so far so good
After reading your posts I'm inclined to give a closer look to EW. Until then, I'm attaching SPX's last 4 year monthly and weekly charts that show a clear MACD bearish divergence. This may point toward some correction in the next couple of months, and a more significant one maybe in the next 9 months. I don't know if I've already posted Van K. Tharp's monthly update. His opinion is that we're in a bear market.
Naturally, I respect your opinion. I have contemplated these technical divergences myself. As you will notice I too use MACD. The divergences can be explained in this manner: The third wave of any five wave structure is usually the strongest. And, this bull market experienced a monster third wave: thus the relative momentum peak in 2003. The fifth wave of an advance is usually not the strongest, and normally creates an MACD divergence. One only needs to look at the 15 minutes charts to see this occur again and again every several days. In this bull market the fifth wave is the subdividing wave. It's first advance into Jan 05 was a typical first wave: good momentum. The next advance into the Aug 05 top was another first wave, and is part of the third wave of the final fifth wave up: good momentum. This current advance, from the Oct lows should eleviate the divergences, because it is a third of a third. Typically the strongest wave in any five wave structure. You can see the acceleration gaps forming already. Since the late Oct low, this market has barely corrected 1% after its advances. It's very powerful! On my daily charts. The DOW has already exceeded the MACD momentum peak of its previous advance. The NDX/NAZ/SPX are preparing to do the same with probably just another 2% upside. Before this wave has concluded, I would expect it's momentum to challenge the peak set in 2003. This should create a capitulation and aide the market in finishing off its bull market. Take a look at the much forgotten transports. The recent advance there has even exceeded the 2003 momentum peak!