Last week’s bullish charts lasted exactly 30min this week, when the SPX hit a new ATH at 2126. After that, the bears took the ball and ran with it till Thursday. On Friday the bulls were back in charge. All in all for the week the SPX was actually only down 9 points. From that perspective nothing out of the ordinary. However, since breakouts keep on being sold off, albeit the SPX making higher highs and higher lows, we would want to see what the bigger picture can tell us. Here I wanted to look at the broader market, the NYA, and in specifically the monthly chart now that April is in the books. The monthly chart will tell us more about the big picture and what the next big multi-month move will be. Multi-month moves is where the real money is made! 🙂
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It follows that the NYA has been range bound for almost a year (blue and orange horizontal line), except for the “Ebola-scare” in October, though price is still within the black uptrend channels. A sustained break above or below these lines will set the stage for a multi-month price move. In addition, the Bollinger bands are getting very tight: a big multi-month move is coming. Combining these two parameters, we thus need to watch those blue and yellow lines/price levels to determine the direction of that move. Can the TIs maybe help us in pre-determining the direction of the move? Let’s take a look.
The RSI5 was negatively diverged in 2013 through early 2014, but is not anymore. In addition, it looks like the MACD wants to move back up (blue arrow). Moreover, the A.I. gave a buy-signal in April (green vertical line) and the FSTO is also pointing back up. Last but not least, price is still above the 20w SMA and SAR. Hence, the TIs are somewhat of a mixed-bag with a bullish bias, and don’t tell us too much just yet about that upcoming move. Can we maybe find out more about the direction of the move using Elliot Wave theory?
In this case I would like to defer to my mentor and friend Tony Caldaro, who simple is the best in this field. He has a great page that shows the different counts possible for the market http://stockcharts.com/public/1269446/tenpp. We then see that there are several counts possible. From “close to a significant peak (Primary III), to “many more subdividing waves ahead of us (minor 1,2 of major 5). Hence, also OEW is not yet entirely clear about the direction of the move. But, it will for sure help us along the way. Thus for now, watch the blue and yellow price levels and keep tracking the OEW count to see which way the market wants to go. Once a sustained breakout or breakdown does happen, it will be multi-month and significant: forewarned is forearmed!