First things first: Intelligent Investing will be celebrating it’s first year and will launch an entirely new website and URL on July 1! As such everybody can then join I.I. for FREE for one month Stay tuned for the URL and on how to sign up for one month free*.
On to the market: Over the past 2 weeks the simplest weekly chart has served us here at I.I. very well, nailing each week! Namely, with this week’s candle the comparison with the late March – early April (blue and orange ovals) timeframe is even more striking; i.e. possible fractal developing. As such can we expect an up week next week? Price remains inside the green ascending uptrend channel, despite all bearish news from Greece which now has become even more bearish (see here and here). But, we may in fact finally have a resolution and can move on to what really matters for the stock market: companies’ valuation, performance, and earnings. In addition, the possible bullish ascending triangle (green and blue dotted lines) is still on the table as the SPX once again failed to hold 2120 but stayed above the lower green ascending lines. Going forward that is an important level to watch on the upside. CLICK CHART TO ENLARGE
On the downside we need to first watch the lower green trend lines of the green ascending trend channel, then SPX 2072-2067/2064 (blue band) as the market clearly found support and resistance at those levels, and then the SPX 2039 level as it is the starting point of the ascending trend channel. The bulls will then namely be in the danger zone as the market is starting to make lower highs (SPX 2130 vs 2135 and lower lows (SPX 2072 vs …) Note the next upcoming Bradley turn date: July 1. Always +/- 2-3 trading days IMHO. The prior turn dates have all been spot on this year (and last year for that matter). No exception. You can check for yourself here. Hence, we should take note of that.
So the bottom line is: a break below SPX 2072 means the correction is ongoing and has us count the recent price action as wave-a was from SPX 2135-2072, wave-b up to SPX 2130, and now in wave-c with the following possible price targets: SPX 2065, 2055, 2045, 2038, 2030, depending on the c-wave extension (1.000x, 1.236x, 1.382x, 1.500x, 1.618x, respectively.) But, a break above SPX 2130 means the correction is over, and we can start making longer term price target predictions
Now getting back to Greece, let me exemplify why it is impossible to foretell how the market will react to the fact that Greece may be leaving the Eurozone, and we may finally get the resolution we all looked for since 2011… Namely, one can postulate that weak hands will sell early in the week on this event/news and then on July 1 we get the start of an upturn. Very possible, right!? But, one can also postulate that the market has already baked in such a negative resolution due to the selling over the past weeks on “bad news from Greece” days. As such, the market may go up until July 1st and then turn south: suck in the last bulls, and burn the last bears. Also very possible, right!? Hence, this is why trying to trade and predict the market’s behavior on news is impossible. Therefore we must trade the market on facts and observable evidence only. That’s the most successful strategy. Trying to trade on projections and estimates is not. Here at I.I. we use the observable evidence and weight of the evidence not what we think it will or should be. We let the market guide us and tell us, not vice versa.
*After the one month free, membership will automatically roll over into a monthly subscription of $24.99/month