S&P 500 Update – Decision Time

The February 8, 2018 Profit Radar Report published the following chart and commentary:

The S&P 500 moved from the yellow zone into the green buy. Does that mean it’s time to buy? It depends on the time frame. Short-term, potentially yes. The hourly chart shows a 5-wave decline into today’s low. A completed 5-wave move, according to Elliott Wave Theory, generally projects a bounce followed by another leg lower. There were many extended fifth waves on the way up, so there is a distinct possibility that there will be extended fifth waves on the way down.”

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.

As it turns out, wave 5 did extend lower and hit the wave 5 target projected on the chart the next day.

As mentioned in the February 8 commentary, a 5-wave decline is generally followed by another leg lower. However, the rally from the February 9 low at 2,532.69 is not clearly corrective.

New Highs or Relapse

The chart below identifies the next key levels to watch. Corrective rallies tend to retrace no more than 61.8% of the prior decline. The 61.8% resistance level for the S&P 500 is at 2,743. Red trend line resistance (going back to April 2016)  is at 2,723.

Thus far, the rally from the February 9 low has been strong in terms of price (170+ points in 4 days), but not necessarily breadth. As the lower graph shows, the percentage of advancing NYSE stocks barely exceeded 70 the last week.

That’s not weak per say, but also not unequivocally strong. A day or two of 80%+ readings would have been more indicative of a sustainable rally.

In short, how the S&P reacts to the 2,723 – 2,743 resistance cluster should provided clues about whether stocks will relapse to test their panic lows or move toward new all-time highs.

Continued updates are provided via the Profit Radar Report.

 

 

Advertisements

February Mini Meltdown: Warning Signal or Buying Opportunity

What caused the February meltdown? If you are looking for another strong opinion, sorry, you won’t find it here.

Before we address the more important issue – whether now is the time to buy or sell – here is one tell-tale sign (of what contributed to the ‘meltdown’) brought out by the January 29 Profit Radar Report.

On Friday, the S&P 500 jumped more than 1% to a new all-time high with less than 55% of stocks advancing, another one of those unusual events. The only other times this happened was once in 1987 and thrice in 1999. All four events were followed by minor 2-8% immediate corrections, and eventually big corrections and bear markets.”

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.

The correction sure was immediate, and it didn’t stop at 2-8%.

Buy or Sell?

Since much of the recent market action happened overnight, we’ll first be looking at the S&P 500 futures chart, which includes overnight trading activity.

The February 5 and 6 Profit Radar Reports published the chart below and stated: “Based on the extremely oversold readings, a bounce is becoming highly likely. S&P 500 futures tested the 200-day SMA and 38.2% Fibonacci. From high to low, the S&P 500 futures lost 12.14%. This is already more than the 5-10% correction we anticipated and close to the 14.38% loss (on average based on the last 4 cycles) leading into the mid-term low (see 2018 S&P 500 Forecast).”

The S&P 500 cash index looks a little different, as the pullback was ‘only’ 9.74%.

Here is one reason why we expect eventual all-time highs: RSI-2 was overbought, which suggested risk, but RSI-35 confirmed the January 26 all-time high.

RSI-35 also confirmed the December 2016 and March 2017 highs. As we mentioned many times in recent years, stocks rarely ever carve out a major top at peek momentum.

Conclusion

This clearly is a market that plays by its own rules (the rules are: there are no rules). Nevertheless, nearly all our studies and indicators suggest a resumption of the bull market once this correction is over.

S&P 500 futures already met our down side target, the S&P 500 cash index not yet. Ideally we’ll see a test of the panic low with a bullish divergence for a higher probability buy signal.

Either way, we consider this a buy the dip market. Continued updates and trade recommendation 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.

S&P 500 Update – The Surprising Implication of Strong Januaries

The S&P 500 just traded in the ‘sweet spot zone’ for over 350 days. What is the sweet spot zone?

It’s above the 200-day SMA, but not more than 10% above the 200-day SMA. While in the sweet spot zone, the S&P has steadily moved higher without overheating. This is extremely rare.

In fact, there are only two other periods similar to this (1965, 1994). Both times the S&P ended the streak by falling below the 200-day SMA. On January 5, for the first time ever, the S&P broke higher (see chart below). What does it mean when the S&P goes from ‘not too hot’ to ‘hot’?

From Not Too Hot to Hot

The research below was originally published in the January 7 Profit Radar Report. At the time (January 7), the S&P 500 recorded 4 consecutive up days and closed at 2,743. The S&P added two more up days, bringing the total to 6 consecutive daily gains to start the year. What’s the implication of such a strong start?

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.

January 7, 2018 Profit Radar Report

Since 1960, the S&P 500 has opened the year with 4 consecutive up days 8 other times (see table).

The thumbnail charts below show performance from December 1 before the first-4-day-of-January spurt to December 31 thereafter). By the end of the year, the S&P was higher every single time (1987 – 1988 was the smallest gain with only 0.2%).

50% of the time (the last 4 times), the S&P fell below the January 1 open at some point during the year.

Based on history, a strong start to January is bullish for the remainder of the year. The risk of a correction throughout the year is 50%.

There is no substitute for knowlege! Be the best informed investor you know, sign up for 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

2017 was one of the most unique years ever, not just for the stock market, also in terms of world events and natural catastrophes.

An almost unprecedented phenomenon was that of strong stock market momentum.

The November 19, 2017 Profit Radar Report pointed out that:

The S&P 500 was higher 8 of the first 9 months of 2017. This has only happened 8 other times (1936, 1950, 1954, 1958, 1964, 1995, 1996, 2006). 2, 3, 6, and 12 month later the S&P was higher every time but one (0.7% loss 2 month later in 1964). Such strong momentum readings (and they are seen across all time frames) are extremely rare. As mentioned back in December 2016 and March 2017, stocks rarely ever top at peek momentum. We have to go back to 1995/96 to find similarly strong and persistent up side momentum.”

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.

Diametrically Opposed

Strong momentum was in direct contrast to some of the oddest breadth readings ever, also mentioned by the November 19, 2017 PRR:

Despite stocks hovering near all-time highs, there have almost been as many stocks with bearish extremes (new 52-week lows or oversold RSI) as bullish extremes (52-week highs or overbought RSI). This happened on multiple days. For example:

Last week more than 8% of stocks had a RSI reading above 70 (overbought). At the same time more than 8% of stocks had a RSI reading below 30 (oversold).

The week before last week saw a lot of buying and selling climaxes at the same time.

At some point last week, 4% of stocks registered new 52-week lows while 30% of S&P 500 stocks fell below their 200-day SMA. That’s dispite stocks being near their all-time high.

This kind of split market is rare (when it occurs near all-time highs) and historically unhealthy (it triggered a cluster of Hindenburg signals). Similar (bad) breadth readings existed 11 other times since 1998. 1, 2 and 3 month later the S&P 500 was down 76% of the time.”

Reconciling Conflicting Indicators

There was no easy way to reconcile the conflict among indicators, but the November 19 PRR concluded that: “Therefore it seems more likely that momentum (supported by seasonality) will trump breadth and push prices higher in coming weeks.”

At times like these, it’s often best to use simple trend lines as arbitrator. The November 28, 2017 Profit Radar Report pointed out a Dow Jones Industrial Average (DJIA) breakout (see chart) and stated:

The DJIA closed for the first time above the (now) green trend line going back to April 2016 (blue circle). As long as trade remains above the trend line, we’ll allow for further gains.”

On December 15, the S&P 500 closed above its respective trend line, and the Profit Radar Report stated: “The S&P 500 closed above the red trend line for the first time (similar to the DJIA on November 28). While above this trend line, gains may continue (even accelerate).”

An up side target in the low to mid 2,700s was given (and already exceeded).

Outlook

Stocks are now at a position similar to December 13, 2016, and March 2017, when the PRR pointed out that: “Stocks rarely ever top at peak momentum.”

Of course, stocks are now also overbought and have become over-loved. This means there is a fair amount of short-term risk. However, it will take some down side ‘escape velocity’ to break the up side momentum and spook investors.

If and once this happens, we anticipate a 5-10% pullback.

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.

 

S&P 500 Update: Top or Not?

The last S&P 500 update outlined why 2,500+/- has been our up side target for over a year.

Our view has been that S&P 2,500+/- is not the target for a major top, but it should lead to a 5-10% correction.

The August 7 Profit Radar Report zoomed in on 2,495 as short-term target (based on the ascending red trend line) and stated:

The S&P 500 ETF (SPY) closed at a new all-time high at the lowest volume of the year. The ideal scenario (and tempting setup to go short) would be a spike to 2,495+ followed by an intraday reversal.”

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

New Highs! Why?

On August 8, the S&P spiked to 2,490.87 and reversed lower. It initially looked like the 5-10% correction had started, but the August 13 Profit Radar Report warned that:

Odds for a bounce are high, and based on the wave structure, the likely up side target is 2,465 – 2,470. Purely based on the oversold condition however, the bounce could be stronger.”

The August 23 Profit Radar Report noted a bullish RSI divergence on the hourly chart, and stated:

Based on Elliott Wave Theory, this correction could even reach new all-time highs without violating any wave 4 guidelines. Whether this is the case remains to be seen, but it’s an option. Hourly RSI is fairly strong, therefore continued gains are easily possible.”

New Highs! Top or Not?

On Tuesday, the S&P surpassed the August 8 all-time high. In terms of Elliott Wave Theory, this high could be wave b of an ongoing wave 4 correction or wave 5 of wave 3, which would lead to the wave 4 correction (other options are possible, but those are the two most likely).

This article explains how and why Elliott Wave Theory has been such a valuable indicator.

The S&P 500 is nearing overbought, there is a bearish RSI divergence on the daily chart and seasonality is soon hitting a weak spot.

However, our reliable liquidity indicator (which has an incredible track record when it comes to sniffing out major tops) confirmed Tuesday’s new S&P highs.

Conclusion

The next inflection range spans from 2,500 – 2,540. Our working assumption is that the 5-10% correction will start then.

Our major market top indicators strongly suggests that the next correction will only be temporary and followed by new highs.

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.

If you enjoy quality, hand-crafted research, >> Sign up for the FREE iSPYETF Newsletter

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.