Executive Summary
Last week I expected the SPX to pull back to 1130-40 early in the week and stay below 1150 but we followed Plan B by reaching 1170 by the Fed and dropping towards 1150 by Friday. This week I expect the SPX to make a low near 1135 by Wednesday and rally towards the highs by Friday. Plan B has the SPX breaking below 1135 and heading towards 1120 by Friday.
The SPX is bearish below 1165 on Monday
The SPX failed to make new highs as suspected and dropped to 1155 by expiration with a last minute reversal that often continues on post expiration Mondays and should give us a positive open. Unless we break above 1165 to signal a move higher into March 24th which was the high 10 years ago in 2000, we should continue lower into Wednesday the 24th as the short term cycles suggest. Many indicators are turning bearish but remain mixed and it will take a break below the 1150-55 level before we can accelerate to the 1035-40 area which must break if the February rally is to be threatened. The short term cycles are suggesting a bearish day on Monday with most of the strength in the morning, but with increasing weakness into Tuesday which should be the worst day. The Breadth Pattern Matches are too few and very bearish including behavior like the January top and my bias is bearish below 1165 for Monday.
6 day cycle early Tuesday (low?) and early Friday (high?)
The rally since February 25th had 3 waves up following a 6 day cycle that suggests the next low will come near Tuesday and should take us down to the 1030 area before a rebound starts, but if it holds above the lower channel near 1145 we are likely to test the 1170 highs by the next expected 6 day cycle high of Friday the 26th. The Tick lines are starting to break below the previous lows set during this February rally and unless they get back above the zero line, we could be seeing a deeper sell-off to the 1121 level this week before any oversold rebound. All other indicators are turning bearish a bit, and the high spike in index Put buying we saw last Wednesday near the highs was possibly smart money and may mark a lasting top until the indicators turn bullish and signal otherwise.
Trend is mixed to bearish for week ending March 26th
Most indicators are turning bearish but not all of them from very overbought levels suggesting a pull back to the 1130 area before heading higher once more to test or exceed the highs depending on the depth of the pull back. Because not all of the indicators got very overbought on the March 17th high, the most likely bullish count is that the rally from the February 5th low is not over and we are now in a Wave 4 down which should find support in late March for the Full Moon and take us back to the highs in April for a weak Wave 5, with a very small chance we get a strong Wave 5 that take us as high as 1228 if it lasts into late April. The alternative bearish count is that we have already completed 5 Waves up from the February 5th low on March 17th which is the 2 year anniversary of the first bear market low of March 17th, 2008, which completes 5 Waves up from the March 09 low, and will now start a decline back to new lows for the 4 and 8.6 year cycle lows of Fall 2010 and Spring 2011.
Outlook is mixed to bearish for late March
The SPX has now reached the 1170 area which was key support and resistance in many years since 1998 and will likely pull back from the overbought blue Tick line, the declining red High/Low ratio line and rising blue Trin line but the red Put/Call line is still not that overbought and we should find support near 1030 and head higher once more to test the highs or exceed them if support comes in high enough. The short term cycles suggest a low as early as Wednesday the 24th, or as late as the first week of April to match the many lows of March 6th, July 8th, September 2nd, October 1st, November 2nd and February 1st and 8th, before a final move up into mid April for the 10 year anniversary of the March 24th and April 10, 2000 major highs.
We are probably seeing the high of the year for the 30 month cycle high in April
All indicators are bullish but getting overbought as we come against the 1170 support and resistance area which has been a key level in many years since 1998 suggesting an April high below 1170 or maybe even 1228 if it lasts until late April. The blue Tick and red McClellan Summations lines on the top window are getting quite overbought but the blue Put/Call and red Trin line just below are not as overbought and the rally should extend into April with some pull backs. The 30 month cycle which has marked many important double tops and bottoms in the last decade is suggesting a January and April double top like we saw 4 x 30 month cycles ago in 2000, but also 30 months ago in July and October 07, which was a mirror image of the July and October lows of 2002 exactly 2 x 30 months before. Both the 2000 and the 2007 pull back were a bit larger than the 9% we saw this time and that would mean the 1150 level may be exceeded by 1-2% or maybe even more to 1228. We are at the same price levels as in early 2004, but with very different fundamentals and those who expect the same outcome in 2010 as we saw in 2004 should be in for a surprise. The fundamentals erased a 5 year Bull market in a single year, and it can erase this one year rally in very little time. |
Breadth Summation Indexes (BSI)
Daily BSI is bearish since March 19-10
Weekly BSI is bullish since February 16-10
but a few bad days from turning bearish
Yearly BSI in a Bear Market since January 4-08
but getting close to a Bull Market
Cycle Summary
The 2.5-5-10 year cycle suggests an April 10-13 cycle high in optimism and has been regular from July 1982. - A Deep 4/8 year cycle low is expected from the the deep Fall lows of 1982, 90, 98, 2002 and 2010. - An 8.6 year PI cycle low is due from the crash of the CRB into 1986, Nikkei 94, USA-Euro 2002 and Many in 2011? - A Deep 10/20 year cycle low is usual in years like Jul 1932, Apr 42, Jun 62, Aug 82, Jul 2002, and 2012 or 2022? - This Bear Market is expected to make new lows by Fall 2010 for the 2, 4 and 8 year cycle lows and by Summer 2011 for the PI 8.6 year cycle low. |
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