SPX update: now vs. fall 2011 comparison shows many similarities

Yesterday I showed that at the lows of the day the hourly TIs were at oversold levels that over the past 3+ years (since the October 2011 low) mostly coincided with important bottoms. So far, so good, as the market has already regained 30+ points. To further this POV, the McClellan Oscillator bottomed yesterday also at almost 40, which is also where buy-able bottoms occur (not shown).

now vs 2011Recently, I looked at the current decline in more detail, since it struck me that the daily Bollinger Bands had not tightened prior to the recent decline off the SPX 2093 high, which they however often do before a decline (see for example the recent December, October and August declines in 2013). This tightening of the BBs foretold the declines correctly, but has be conspicuous by its absence this time. I alerted my members to this fact earlier this week as it means the current decline is different from the others and foretells a different story.

Namely, this recent decline is very similar to the price pattern observed after the October 2011 price low of SPX 2011 (blue circles). Note also the similarities in the prior price approach to the declines and the similar MACD set up and pattern (green arrows and red circles, respectively).

Of course what happened to price in the following 4 months after the December 2011 low; up, up, up; is exactly what we hope and expect price will do now as well over the coming months.

The caveat is that if the market decides to take a different path this time, and we see a bounce to SPX 2040-2050 followed by new lows it means the market will finish a much larger expanded flat 2nd wave, with the move from SPX 1821 to 2079 being the 1st wave. The end result will however be the same: much higher prices.

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