S&P 500 Update – Outrageous Projection

The S&P 500 is following closely my projection (in yellow) published in the Profit Radar Report’s 2019 S&P 500 Forecast.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Unfortunately we never got the pullback expected in Q1 2019, but the new all-time highs are right ‘on schedule.’

This doesn’t mean there wasn’t any uncertainty on the way up. The Profit Radar Report always looks at the market from different angles, and at the beginning of April there were enough conflicting indicators and signals to cause analysis paralysis.

Instead of further exploring the various cross currents, and burdening subscribers with information overload, I decided to take the approach described in the April 7 Profit Radar Report:

Perhaps a simplified approach will help navigate this environment. Red trend line resistance has held thus far, and has not become main stream enough to be negated. Green trend line is near-term support. An immediate break above trend line resistance may lead to closure of the open chart gap at 2,921.36.”

Below is an updated version of the chart published on April 7. Instead of breaking above the red trend line to close the gap at 2,921, the S&P 500 has been inching higher like pulled on a zip line.

Regardless of how, the gap has been closed, and the S&P 500 has now one less reason to continue higher without interruption (chart gaps act as magnets).

I wouldn’t be surprised to the see the S&P 500 grind a little higher, but then we should see whether the remainder of my S&P 500 projection – which is quite outrageous – will also prove correct.

Based on investor sentiment, a nasty decline is possible and becoming more likely, but based on liquidity any drop is probably only temporary. According to Elliott Wave Theory, an upcoming drop (once smaller waves 4 and 5 are complete) could be a steep wave C or wave 2, but as long as the S&P stays above 2,900, it can grind higher.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

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S&P 500 Update – Let’s Call it What it Really Is?

Last week’s S&P 500 update highlighted a triangle and complete 5-wave pattern likely to be followed by a ‘pop and drop’ with a minimum down side target around 2,720.

Price popped to 2,817, and subsequent dropped to 2,722, confirming (and possibly completing) this pattern.

As mentioned in the March 10 Profit Radar Report, to see more down side, the S&P would have had to stay below 2,764, otherwise odds would favor a new high.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

On Monday, the S&P moved above 2,764, and subsequently a new high.

How does that new high fit into the bigger picture?

Time to be honest

My analysis includes many different indicators, but the only one that’s really mattered is the December/January breadth thrust discussed here.

Elliott Wave Theory (EWT) on the other hand has been of little help. In fact, I have rarely seen more conflict among EWT analysts with many either adjusting their labels to match stubbornly held interpretations, or changing on a whim.

This can be (and usually is) costly for readers and investors. The honest approach is to just admit when the EWT structure is foggy.

The chart below shows the EWT conundrom: The wave structure going into, and coming out of, the December low is messy, and up to interpretation.

If you are not familiar with EWT, in order to pinpoint the main trend, it’s important to discern a clear 5-wave (or at least 3-wave) pattern. A 5-wave pattern usually marks the dominant trend, and is followed by a pullback, and trend continuation.

The blue stretch above labeled “5 waves” is the only clear pattern I’ve been able to discern (published real time in the March 3 Profit Radar Report, see chart below).

The completed pattern suggested a 100-point drop (or more). In reality it led to a 95-point drop. Since the drop reached my minimum target (2,720, green trend line, first chart) and stopped after only 3 waves (3 waves are counter trend), it may have completed the entire pullback.

The blue “a-b-c” labels show another valid path, which suggest the S&P 500 will soon relapse and re-visit the 2,700 range.

Technical Analysis

Basic chart analysis shows the S&P 500 bumping against a cluster of resistance (first chart). Risk is elevated while below resistance, but the more obvious a resistance level becomes (such as this one), the more likely it is for price to surpass or see-saw that level.

An immediate U-turn, or a quickly reversed spike above resistance, would be the first indication that the blue path illustrated above is playing out.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

S&P 500 – Change of Trend?

This is a shorter-term Elliott Wave Theory-based forecast. A longer-term forecast based on a different set of reliable indicators is available here.

Most of February’s market action was outright boring!

Starting in late February, however, boring morphed into revealind. The range bound trading actually provided clarity.

Via the February 27 Profit Radar Report, I pointed out a possible S&P 500 triangle formation. The chart below (published in the March 3 Profit Radar Report) illustrated the triangle formation as it corresponds to Elliott Wave Theory.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Pop and Drop

In short, the triangle was to be followed by a pop and drop.

As the updated price chart shows, this is what happened.

The green line highlights important support provided by the February 21 low (2,664,55).

I don’t think it will, but as long as this support holds, a different kind of Elliott Wave Theory formation – a more complex ‘flat triangle’ – is possible (see blue lines in chart below).

Regardless, the post triangle pop should be wave 5, which marks the completion of this particular rally leg. The wave 5 high likely occurred already on Monday (2,816.88).

Regardless, a pullback is here or near. How much of a pullback?

How Big of a Drop?

It’s been difficult to count the rally from the December low in terms of Elliott Wave Theory, but the rally from the February 21 low has taken the shape of 5 waves (see above charts).

A completed 5-wave rally is always followed by a pullback. The question is this: Does the 5-wave rally complete only a small rally leg (going back to early February) or the entire rally from the December 24 low?

The blue box highlights the discussed 5-wave sequence (chart published in the March 3 Profit Radar Report). We know that this portion of the rally should be retraced for sure (solid blue arrow). However, it’s possible that the latest 5-wave sequence ends a larger A-B-C or 5-wave advance, which would suggest a much deeper drop (dashed blue line).

The S&P 500 futures chart, published in the March 3 Profit Radar Report, shows an ominous wedge formation with decreasing volume, which could translate into significant down side risk.

It looks like the minimum down side target is around 2,720, but a drop to 2,600 (and lower) seems quite likely.

We will asses down side risk as the decline progresses.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

S&P 500: Does Low Fear Portend High Risk?

Below is a free excerpt of the December 9, Profit Radar Report, which takes a detailed look at various sentiment, liquidity, breadth and moment indicators to gauge the down side risk. Since this update is published out of context with all the other updates, an additional “Summary” section is provided at the end of the December 9 Profit Radar Report to provide bigger picture context.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

                                       * * * * * December 9, 2018 Profit Radar Report * * * * *

The S&P 500 closed at 2,633.08 on Friday. That’s only 1.99 points higher than the November 23 low. If the S&P would have closed at a new low, it would have been interesting to see if there are any bullish divergences.

Well, futures are down 20+ points in Sunday’s trading, so let’s just pretend the S&P closed at new lows, and look for potential divergences anyway. The blue box highlights the price action since the September high.

  • RSI-35 did not confirm the ‘new low’ (RSI-2 is near over-sold)
  • The cumulative NY Composite a/d lines did not confirm
  • The NY Composite a/d ratio did not confirm
  • The percentage of stocks below their 50-day SMA did not confirm

How about different sentiment gauges?

  • The VIX is below its October extreme
  • The VIX/VIX3M ratio is below its October extreme
  • The CBOE equity put/call ratio is at the same level
  • Contango is above its October extreme
  • The SKEW carved out a new low
  • The CBOE equity put/call ratio (5-day SMA) is below its November extreme
  • NAAIM equity exposure is about even, but above its November extreme
  • Bullish Advisors polled by II are less bearish than last week
  • Bullish Investors polled by AAII are less bearish than last week

All the above indicators show that there is little panic, certainly less panic than in October or November. This could be viewed as either 1) a bullish divergence or 2) there is enough room for the market to fall further.

Based on Elliott Wave Theory, the S&P 500 could be 1) nearing the exhaustion point of this down leg, or 2) be in a strong and sustained wave 3 lower (S&P could still rally towards or into 2,700s before next down move). The summary section below discusses which scenario is more likely.

Another attention grabber was last week’s ‘death cross,’ where the 50-day SMA fell below the 200-day SMA.

The last time death cross that received a lot of attention was in May 2016, when the 50-week SMA fell below the 100-week SMA. This was supposed to be an ‘irrefutable sell signal,’ but ultimately turned out to be one of the best buying opportunities ever.

At best, SMA crossovers have a spotty track record, and we don’t base our anlysis on such lagging indicators. For those interested, the arrows in the weekly chart below mark all bearish and bullish 200/50-day SMA crosses over the past 20 years (weekly chart shown to capture longer-term history of signals).

Shown below are various support levels that may help navigate the coming weeks, and answer the question posed above: What’ next? Sustained move lower, or quick wash out decline followed by snap-back rally?

  • 2,618: Black trend channel
  • 2,607: Wave C = 61.8% wave A
  • 2,550: Wave C = 78.6% wave A
  • 2,500: Fibonacci support going back to 2011
  • 2,478: Wave C = 100% wave A
  • 2,385: Trend line support going back to 1998
  • 2,280: Trend channel support going back to 2009

The Russell 2000 IWM is in the general green support range, with trend channel support at 143.25 and 141.30. A bounce from 143.25 – 141.30 seems likely, but sustained trade below the lower trend channel would unlock lower targets.

The Nasdaq-100 QQQ has a general range of support at 161 – 157. A break below, would likely lead to a retest of the February/March lows at 154-150.

Summary: The above analysis was based on Friday’s closing price. The S&P 500 futures chart below includes Sunday’s 20+ point drop. Trade is right around black trend channel support. Anytime prices reaches support, odds of a bounce increase.

Based on the Elliott Wave Theory structure, we are trying to figure out whether we are nearing the end of this down leg (with a potential wash out decline), or if trade will accelerate lower (as a wave 3 would).

A brief drop (1-3 days) below 2,618 (with next support at 2,607, 2,550 and perhaps as low as 2,500) followed by a quick recovery would preserve the bullish divergences and suggest sellers got ‘washed out’ and a year-end rally is underway.

Persistent trade below 2,618 and 2,607 means we need to allow for more weakness.

We will take a stab at going long (only with a small amount as this correction may carve out lower lows eventually) if the S&P 500 drops below 2,607 and subsequently rallies above 2,620 (stop-loss to be set at that day’s low). The SPY buy level is thus linked to the S&P 500 (approximate corresponding SPY levels: buy on drop below 261 followed by move above 262.10 with stop-loss at day’s low).

The very first graph of today’s update (S&P 500 in 2011 – blue box) illustrates what a wash out decline may look like.

                                        * * * * * December 9, 2018 Profit Radar Report * * * * *

SUMMARY: The lack of fear, expressed by various ‘bullish divergences,’ is likely to result in a short-term bounce. Back in September, we expected a correction toward 2,400, and that seems still likely (longer-ter S&P 500 outlook available here). A drop toward 2,400 (or at least below 2,500), would probably trigger the kind of ‘panic readings’ commensurate with a more significant bottom.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

Stock Market Update: This is the Clearest Chart Right Now

There’s never been a time when articles on iSPYETF.com have been posted at the snail-pace of about one per month … until now.

Unless you are a stock picker, there’s simply been nothing worthwhile to write about.

The October 1 Profit Radar Report warned of just such a period of inactivity:

The bullish Elliott Wave Theory count would see stocks grind higher for a number of weeks in a 2 steps forward, 1 step back pattern. A real unexciting, unstimulating and uninspiring grind higher to 2,600+/-. Unless the S&P drops below 2,500, this is now the most likely outcome.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

This ‘real unexciting, unstimulating and uninspiring grind higher to 2,600+/-‘ has already lasted more than 7 weeks.

The Clearest Chart Right Now

One of the best tell-tale since during this 7-week period came from the Russell 2000. The chart and commentary below were published in the November 15 Profit Radar Report:

The Russell 2000 is leaking lower. RSI-2 is now oversold with support around 1,452. The correction since the October 5 high looks like a wave 4. The 38.2% Fibonacci retracement level (a common target for waves 4) is at 1,451.35 (just 3 points below today’s low). The R2K appears to be nearing a bounce, there’s even a possibility today’s low was a more sizeable low.”

Below is an updated Russell 2000 chart. Trade touched support around 1,450 on November 15, and rallied strongly. The minimum requirement for wave 5 is to reach new highs (which it already did), but the convergence of resistance levels around 1,542 (red oval) is the next most logical up side target (higher is also possible).

S&P 500 Update

The S&P 500 has basically reached our up side target around 2,600. The post-Thanksgiving week is seasonally weak, but as long as trade stays above 2,590, the S&P is likely to move towards the next resistance cluster around 2,650.

Continued analysis for the S&P 500, Russell 2000, gold, silver, euro, dollar and other equity indexes is provided via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Top Shelf Traders Features iSPYETF’s Profit Radar Report

Top Shelf Traders, a monthly eMagazine for active investors and traders, just featured iSPYETF’s Profit Radar Report.

Every month, Top Shelf Trader introduces unique approaches to trading stocks, options, futures, and Forex.

The Profit Radar Report is featured in the “Stock” section.

A complimentary look at Top Shelf Trader is available here.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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Russell 2000 Delivers New All-time High with Bearish Divergence

The Russell 2000 has been on a tear. On November 28, the R2K ended a 15-day winning streak when it touched red trend line resistance at 1,349 mentioned by the Profit Radar Report.

This pullback was to be temporary. The November 30 Profit Radar Report stated that: “The R2k is nearing an oversold condition and strong support at 1,309 – 1,296,” and recommended to buy R2k at 1,305. The corresponding level for the iShares Russell 2000 ETF (IWM) was 129.90.

Now the R2K is back at trend line resistance, but this time it carved out a bearish RSI divergence. There was no such divergence on November 25, which strongly suggested new all-time highs.

Bearish RSI Divergence, a Red Flag?

Under normal conditions, this bearish RSI divergence would be a serious red flag. However, the November 13 Profit Radar Report included the following observation:

The DJIA and Russell 2000 ended the week overbought, which normally will cause a pullback. However, if the S&P is truly in a wave 3 advance, stocks will continue to plow higher without much letup.”

The Russell 2000 has plowed higher ever since. The unique condition that allows for continuous gains despite on overbought condition is discussed here: S&P 500 Update – Expect the Abnormal?

Here is another statistic in favor of higher prices: Since 1979, there’ve been 12 other times when the R2K rallied at least 12 days in a row. A month later, the R2K was higher 10 times. 3 month later, the R2k was higher 7 times. 6 months later the R2k was higher 10 times.

The chart above provides long-term context for the R2K. The red trend line going back to 2011 is obvious resistance. If (and as long as) the R2K is able to sustain a break above this line, it may just continue higher.

Until it does, some caution is warranted.

Continuous updates for the Russell 2000, S&P 500 and other asset classes are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.