Last week I was bearish because of how NYAs weekly chart looked like. See here. However, as we all know by know, the bulls turned the tables within a matter of 2 days, which the weekly chart then did not foretell. Since 1 picture says more than a 1000 words, let’s look at an animated series of how NYA’s weekly chart progressed over the past week, starting with where it ended Friday December 12.
- On Friday December 12, the chart looked weak and bleak with all TIs pointing down and giving sell crossovers. Nothing bullish to see here.
- By Tuesday December 16, the weekly chart looked even worse, with lower prices causing the bollinger bands to expand; which often means more weakness ahead. All TIs are pointing down firmly, all wanting to see lower lows ahead; while price was firmly below the 50w SMA.
- BUT on Wednesday December 17, the tables are turned 90 degrees, and the market is at a cross roads: continue up or fall back down.
- On Thursday December 18 the market decides “continue up” it is and a big bullish candle is created that erases all of the TIs’ bearish setups and launches price above both the 20w and 50w SMA.
- With the week ending December 19, the TIs have turned almost all around and are now pointing back up, getting close to buy crossovers.
(Text continued below plot)
Based on this, it was certainly prudent to be bearish by the end of last week; however, within less than 2 days (!!!) the weekly chart was turned around 180 degrees, which is almost impossible to foretell, and the weekly chart is now bullish instead. Can we expect another whipsaw next week? Given seasonality, next week is a Holiday shortened week that are often bullish, and the weekly chart firmly back in the bulls hands; I don’t think so. Note also that the NYA did an almost perfect 62% retrace of the previous rally off the October lows, which is the ideal, textbook, retrace level for a 2nd wave. The SPX, DOW and Tech indices only retraced 38%. Hence, the wave count suggest the market is in the starting gates of a larger 3rd wave up, which could bring the SPX all the way to 2400s. But, as this analysis shows, let’s take it week by week as things can change very quickly in this market.