Wednesday, April 5, 2017

An intermediate term drop that will dwarf most bearish projections

It's been a while since my last post. I have been waiting for the blow off rally to run its course.

Before the presidential election, SPX tested our downside target and we called for a rally from that point.

SPX daily



The rally extended into our long term target zone and exhausted at SPX 2400

SPX quarterly

 
Like all magnificent things in life, this bull market is too ending with a magnificent closure After 7 years of orchestrated bull market, thanks to the post-election enthusiasm, we finally saw the  complete capitulation of the remaining hard core bears who stayed bearish for 7 years.

SPX 2400 which was tested on March 2nd was an important long term resistance on several index charts and we identified these in our March 2nd post:

Banks hit a long term resistance on March 2

Correlation between inverse SPX and forward Value Line Index spiked significantly on March 2nd, this indicated that most of the stocks were not following a few large cap components on the upside

Correlation btw Value Line Index and inverse SPX

SPX bumped against a long term resistance on March 2nd

SPX monthly


hourly close-up



Since SPX 2400, we have been trading on the bear side most of the time and today's fake-out was not a game changer as we indicated in our intraday update as follows:

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Intraday Update

April 5, 2017 at 11:22 am 

Market opened above this declining top line, and such opening triggered a short covering at the open.

SPX 30m


but so far this seems to be nothing more than a bounce within the daily and intraday bearish structures which are still intact.

Broad Market Index backtesting multiple broken channels

Broad Market Index hourly

  
Another resistance line Broad Market Index hourly

SPX hourly



RUT daily with its Volatility index

Financials hourly


Broad Market Index daily


Transports Daily


SPX daily


DJI daily


Midcaps daily

Broad Market Index daily

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Soon after this post, SPX plummeted into the negative territory.

 
Our short term target for this downleg is around 2310 but we have a lower intermediate term targets that should be tested later this summer.


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