S&P 500 Update: Is This Rally Leg Over?

The September 5, 2016 Profit Radar Report published the chart below along with the following commentary:

The chart below shows the long-term up side target purely based on projected symmetry. Based on the 1997 – 2013 trading range, the measured up side target is S&P 2,330 – 2,485, which is in the general vicinity of the 2,290 – 2,342 Fibonacci levels mentioned in the 2016 S&P 500 Forecast. Higher targets are possible, but we’ll reassess once we get there.”

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.

The second chart shows the trading activity over the past year along with short-term bars and trend lines we used to narrow down the up side target (the latest up side target was 2,494).

Short-term X-Ray

A special August 7 Profit Radar Report update featured this potent warning:

The S&P 500 ETF (SPY) closed at a new all-time high at the lowest volume of the year. For the first time in a while, there is a bearish divergence between the S&P 500 and the NY Composite a/d lines. The ideal scenario (and tempting setup to go short) would be a spike to 2,495+ followed by an intraday reversal.”

This is almost exactly what happened. The S&P 500 spiked as high as 2,490.87 before falling 52 points.

However, this drop quickly caused an oversold condition.

A special August 10 Profit Radar Report update featured this chart and stated that:

The CBOE equity putt call ratio (last chart) spiked to the highest reading (0.88) since April. The VIX is overbought. The VIX/VXV ratio jumped and contango fell. Both are near levels that have been seen at VIX highs. Stocks are oversold and ready to bounce. Based on the wave structure, we anticipate this bounce to be brief (2-6 days) and stay below the prior all-time highs (although the extent of the oversold condition would allow for a stronger bounce).”

Conclusion

The August 28, 2016 Profit Radar Report featured a bullish Elliott Wave Theory count with a projected up side target around S&P 2,500 (more details here: S&P 500 Update – Expect the Abnormal).

One of the images featured was a conceptual “We are here” chart (shown below). The green dots mark where we were in August 2016 (along with probability scores).

The red circles highlight where we are at today. The upcoming correction should be a choppy and frustrating wave 4 decline to be followed by another rally to new all-time highs. It then remains to be seen whether that high will be a major top or not.

Since the S&P did not quite reach our up side target, there is an alternate interpretation, which allows for continued gains almost immediately. However, that remains only an alternate unless the market tells us otherwise.

Continued analysis, with down side targets and buy/sell signals are 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.

 

S&P 500 Update: End of Growth Spurt?

Since the presidential election (November, 2016), the S&P 500 enjoyed three distinctive ‘growth spurts’ (chart below, green arrows).

The first one ended on December 12, 2016, the second one ended on March 1. What about the third one?

End of Growth Spurt?

The December 14, 2016 PRR and the March 5, 2017 Profit Radar Reports stated that: “Stocks rarely ever top at peak momentum. Any pullback should be temporary in nature. The question is how temporary.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.”

The December 14 and March 5 peak momentum highs were followed by sideways corrections and eventually new highs.

The latest all-time high (July 27), however, did not occur on peak momentum. RSI-35 (momentum indicator) is now obviously lagging. The reverse conclusion is that risk of a top is higher today than it was in December and March.

However, our ‘secret sauce’ liquidity indicator (more details about ‘secret sauce’ is available here) is at new all-time highs.

Several times since the 2016 low, the Profit Radar Report stated that: “Our liquidity indicator is already at new all-time highs, it’s just a matter of time until the S&P 500 will follow.”

Short-term vs Long-term

In general, RSI divergences tend to be more short-term (weeks) in nature, while ‘secret sauce’ is longer-term (months). This would translate into shorter-term risk, but longer-term gains.

Up Side Target

For the past year, the Profit Radar Report’s S&P 500 up side target has been around 2,500 (more details here), and a ‘melt up alert’ was issued in 2016.

Now that the S&P 500 as good as reached our up side target, we are using (ascending) short-term trend lines/channels to help narrow down the final squiggles.

So far, the low end of our target was missed by one point. This may have been enough, but for now we are allowing for another stab higher.

Continued analysis along with up-and down side targets and trading recommendations 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.

 

Are Stocks Quietly Deteriorating or Revving up for More Gains?

Every major market index has been marching to the beat of their own drum.

The Nasdaq-100 just slid to the lowest level since May 18, while the Dow Jones Industrial Average (DJIA) set a new all-time (intraday) high just on Monday. The S&P 500 is about a percent below its all-time high.

Some reason that there’s no longer enough liquidity to buoy the whole market.

This begs the question, if all this range bound churning is a sign of internal deterioration (and the ‘inevitable’ drop) or if stocks are just taking a breather and revving up for the next spurt higher?

KISS – Bottom Line

The May 29, 2017 Profit Radar Report already observed this: “There are times when indicators line up and we discuss (high) probabilities, and there are times when indicators conflict, and we are forced to discuss possibilities. Unfortunately the later is the case right now.

Each of the major indexes is tracing out a different EWT pattern, breadth measures, seasonality and investor sentiment do not offer a clear message. Therefore we are reduced to dealing with possibilities.

The weight of evidence suggests that in the not so distant future stocks will run into some trouble. The up side target for the S&P 500 is 2,450 – 2,530. The S&P 500, Russell 2000, DJIA and Nasdaq-100 are all overbought, but above short-term support. As long as this support holds, more gains are likely.”

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.

Not Exciting, but Effective

Ever since we’ve been watching support (which has been at 2,420 for the S&P 500) as stocks have gone nowhere. It should be noted that the 2,420 support level is becoming too obvious and therefore less important. The June 25 Profit Radar Report stated that: “A move below 2,420 (especially 2,400) would increase the odds that a multi-week/month top is in.”

Watching support (and resistance) is not the most exciting approach to market forecasting, but there are times where it’s best to realize there are no clear signals (such as in May), and simply wait for the market to offer the next actionable clue.

This approach protects against overtrading or the anxiety associated with a non-performing (or worse, losing) trade. In short, it provides a measure of peace of mind, a rare commodity in this market.

Summary

Mid-and long-term, our comprehensive S&P 500 forecast remains on track.

Short-term, we are waiting if the S&P pushes deeper into the 2,450 – 2,530 target zone, or if the June 19 high at 2,454 was the beginning of a more protracted (but temporary correction).

Whichever direction the market breaks, it will eventually be reversed. Ideally, we are looking to sell the rips (above 2,454 if we get it) and buy the eventual dip (although this dip may last longer than many expect).

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 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.

Comprehensive S&P 500 Update

The latest S&P 500 all-time high clocked in at 2,440 as the S&P 500 continues to plow over bearish forecasts

Will the S&P 500 in particular, and stocks in general, continue to slog higher?

Here is our comprehensive forecast based on the “four stock market engines:”

  • Supply & demand (liquidity)
  • Technical analysis
  • Investor sentiment
  • Seasonalities and cycles

Supply & Demand

We first unveiled our favorite liquidity indicator in 2014. This indicator correctly foreshadowed the 1987, 2000 and 2007 market top and – aside from a timely caution signal in 2015 – persistently pointed towards continued bull market gains.

For readers of our free website, we’ve dubbed this indicator ‘secret sauce.’ Why, and how this indicator is used is explained here.

In short, major market tops have been preceded by bearish divergences (S&P 500 rallies to new all-time highs, secret sauce does not).

Throughout 2016 and 2017 however, there’ve only been bullish divergences (secret sauce rallies to new all-time highs, but the S&P 500 lags behind). The last four times this happened was on April 30, and April 9, 2017, September 22, and April 16, 2016 (see green arrows).

Each time the Profit Radar Report stated that: “[Secret sauce] is already at new highs. The S&P 500 will soon follow.”

Secret sauce just confirmed the latest S&P 500 high, which means a major market top is still many months away (this doesn’t mean we can’t see a correction though).

Technical Analysis

The most exotic ‘tool in the technical analysis box’ has also been the most accurate: Elliott Wave Theory. Therefore we will focus on Elliott Wave Theory for this update.

The charts below were initially published in the August 28, 2016, Profit Radar Report, and have been our roadmap ever since as the S&P moves toward 2,500.

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.

We have made some minor adjustments recently, which place the S&P near the beginning of a more pronounced, choppy correction (see ‘we are here’ on top graph). This correction would be labeled as wave 4 (likely intermediate degree).

Despite rising prices, there has been a measure of internal weakness (see chart below). There have been no strong up days (90% days, where 90% or more of volume flows into advancing stocks). The percentage of stocks above their 50-day SMA is also lagging.

This is compatible with a rally that’s nearing a (temporary) point of exhaustion.

Investor Sentiment

The chart below provides a long-term comparison between investor sentiment near the 2007 high and today.

In short, investors are not as euphoric about stocks today as they were in late 2007. Based on investor sentiment, stocks are not at a major market top.

In fact, stocks may still benefit from the pessimistic extremes seen in January/February 2016 (when the S&P traded below 1,900).

The January 29, 2016 Profit Radar Report stated that: “Sentiment turned pessimistic enough to become a bullish tailwind for the coming months.”

Seasonality & Cycles

Cycles project weakness later on in 2017 and seasonality is hitting a soft spot until September/October.

Conclusion

Once the S&P 500 reaches our up side target we will be looking for a more pronounced correction, but not the end of this bull market.

Continuous updates and actual buy sell recommendations (we haven’t had a losing trade since June 2015) are 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.

 

S&P 500 Update

This article was published on June 1, 2017 at 9:00am PST on iSPYETF.com

15 points in 12 weeks. That about sums up the S&P 500 ‘progress’ since March 1.

The March 21 Profit Radar Report warned that: “In terms of Elliott Wave Theory, the March 1 high (2,400.98) is a wave 3 high. This means we are in a wave 4 correction. Waves 4 are the most choppy, and unpredictable of all waves. The coming months will likely test investors patience.”

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.

Predicting a ‘go nowhere’ market is no fun, but it helps set expectations and limits frustration.

Even within trading ranges, there are brief bursts where the market telegraphs its next move.

For example: The May 7 Profit Radar Report featured this chart with 3 projections (based on Elliott Wave Theory).

Each option (green, dark blue, and light blue) projected a pullback around S&P 2,410 in mid-May followed by a renewed rally. The pullback happened on May 16, a day after the S&P hit 2,406.

Although this pullback failed to hit our buy trigger (which was set a bit lower), buyers stepped in as anticipated. The S&P has moved as high as 2,419 and is currently held back by trend channel resistance (see chart below).

The rally from the May 18 low at 2,353 seems to support the green Elliott Wave Theory-based projection. If that’s the case, the S&P will continue to move higher.

Although Elliott Wave Theory has been very accurate in recent years (it projected the February 2016 low and the ‘Trump rally’), there are reasons (i.e. lake of breadth, bearish divergences, ATR – see vertical red lines in chart above) to take this bullish Elliott Wave projection with a grain of salt.

Therefore it’s best to play the next moves step-by-step. A move above black trend channel resistance is required to unlock the next up side target (red trend line resistance around 2,430).

A move below 2,400 and 2,380 on the other hand, would seriously rattle the immediate bullish potential.

The longer-term outlook shared in the August 28 Profit Radar Report remains valid.

Continuous 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 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.

 

How Alarming is the 23-year VIX Low?

According to Barron’s, the VIX is flashing a stock market warning. Barron’s is not alone. If you threw a water balloon in a room filled with analysts, odds are you’ll hit someone who’s bearish stocks because of the VIX.

Facts Trump Opinions

VIX readings below 10 are rare. There’ve only been 9 other ones since the VIX’s inception in 1993. None of them led to stock market crashes (click here for detailed analysis).

Some claim that the 2000 and 2007 market tops were preceded by a low VIX, but that’s one of the biggest misconceptions on Wall Street.

This special report, published by the Profit Radar Report on June 16, 2014, showed why the VIX was TOO LOW for a major market top back then (and still is today).

VIX Seasonality

VIX seasonality supports overall lower readings until the major seasonal low in early July.

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.

VIX-based Indicators

The chart below plots the S&P 500 against the VIX, VIX/VXV ratio, CBOE equity put/call ratio, and contango.

The VIX/VXV ratio gauges fear of short-term volatility (30-day, VIX) compared to longer-term volatility (90-days, VXV). Readings above 1 happen when investors are more concerned about the short-term than longer-term.

This occurs near stock market lows and has been a very reliable buy signal. The April 16 Profit Radar Report noted the VIX-sell signal highlighted in green (VIX is down 39% since).

On Monday, the VIX/VXV ratio was 0.776. Readings below 0.76 happen when investors are more concerned about the longer-term than the short-term.

Although a potential warning sign, the VIX buy signal (<0.77) has not been as accurate as the VIX sell signal (>1.0).

The CBOE equity put/call ratio and contango are showing a measure of bearish (for stocks) potential, but have plenty room to become more extreme.

S&P 500 Outlook

The April 11 Profit Radar Report published the chart below along with the following forecast: “As long as trade remains above 2,330, we are still looking for higher prices. The chart below outlines two potential up side targets (2,365 – 2,375 and 2,380 – 2,410).” The upside target was revised to 2,405 – 2,410 on April 26 (more detailed outlook available here).

The S&P is now just below 2,410. It remains to be seen whether bears will take a stand, but if they do, it should be around 2,410 (which would result in a VIX spike).

Continued analysis for the S&P 500, VIX and other asset classes is 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.

 

S&P 500 Update – Churning for a Burning?

The S&P 500 reached our minimum down side target and rallied strongly. Is this rally for real or are stocks just ‘churning for another burning’?

Bullish Signals

This week’s rally is credited to the French election, but a series of solid buy signals triggered days before the news from France.

The CBOE equity put/call ratio signaled a S&P 500 rally.

Contango and the VIX/VXV ratio signal a VIX decline.

The chart below – which plots the S&P 500 against the VIX, VIX/VXV ratio, CBOE equity put/call ratio, and contango – was published in the April 16 PRR along with the following commentary:

The VIX/VXV ratio, equity put/call ratio and contango are at multi-month extremes.It appears like the amount of sellers left (needed to drive prices lower) is rather limited. The weight of evidence strongly suggests that we should focus on the upcoming buying opportunity, not on how much more down side may or may not be left.”

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.

The same Profit Radar Report also highlighted positive seasonality (see below).

Bearish Caveat

This bounce is in sync with seasonality and various buy signals, but will it last?

The April 9 PRR featured the yellow projection shown below. According to this scenario (based on Elliott Wave Theory), the S&P would reverse above 2,390 and fall to new lows (2,320 or below).

The S&P 500 is above 2,390 and has entered a price zone where a relapse becomes possible.

We will be watching various breadth, money flow, sentiment and technical indicators to determine whether this rally will stop here or not.

Continuous 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 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.