Monday, April 22, 2013

Charts 04-22 a.m.

I drew up this chart last night, but didn't post it because the seemingly strong pump in the /ES futures was making me wonder about it.  But it turned out OK actually, we popped right to the top of the little pink channel and 1560 at the open this morning.

The .618 retrace of the move up from the (wave 4) bottom is 1545.  A close there today and maybe a McClellan Oscillator reading of -150 or so would set us up for the final rally.  There's kind of an inverse head-and-shoulders pattern sorta-kinda there with the 4/17 low, but the pop at the open today tilted the neckline out of whack.

If we keep sliding and close closer to 1540, then that could be the last downdraft in the wave 4, the [v] of c of 4 move.  Either way we should then start heading up for another test of the 2000-2007 highs trendline around May FOMC.

Edit: there is a nasty downward channel on the chart that could take us as low as SPX 1526 today.  That would leave the bulls with a do-or-die close.


Bryan Franco said...

Ready for a string of double negatives? I did some digging this weekend and found that there has been only one peak-to-trough decline in excess of 20% that was not preceeded by a 5% + "correction" that did not result in an incremental new high in the S&P 500. The lone instance is 1961-1962. In other words, history says you need a 5% + correction followed by at least one more high before a major top.

Bryan Franco said...

I need to qualify the above by stating that this is true when the last two declines were "shallow", between 3-5%, which we had in December and February, and which came immediately after the last 5 % + correction (September-Nov). So it is only in 1961-1962 that the market went 5% + correction > new high >3-5% correction > new high > 3-5% correction ... > 20% + correction.