Simple, Common Sense S&P 500 Update

For almost two years, investors were spoiled with low volatility and high returns, but recent market action has rattled the cage.

Will there be more ‘cage rattling!’ If so, how much?

Sometimes a simple common sense analysis is the best one. KISS.

KISS

The February 11 Profit Radar Report stated that: “For well over a year stocks have almost exclusively gone up, slow but steady. For the past two weeks, stocks have gone down quickly. What’s next? The temptation and trap is to think two dimensional – up or down – since that’s most of what we’ve experienced lately. However, stocks could also go sideways for a period of time.”

On March 27, the S&P 500 was less than 7 points away from its February 9 close. Sideways indeed.

The February 11 Profit Radar Report also provided common sense long-term context via the chart and commentary below:

1 – 2 – 3 is how we label the rally from the February 2016 low (according to Elliott Wave Theory – EWT). Wave 3 (wave 5 of wave 3 to be exact) extended much higher than normal (blue box).

Based on EWT, wave 3 is followed by wave 4, which is where we are currently at. Waves 4 are generally choppy, range-bound, long-winded, unpredictable corrections that retrace ideally 38.2% of the preceding wave 3. The 38.2% Fibonacci retracement level is at 2,536.

In terms of price, wave 4 has already reached its down side target. In terms of time, wave 4 would be unusually short.”

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.

Wave 3 lasted almost 15 month (November 4, 2016 – January 26, 2018). The February ‘mini meltdown’ inflicted an 11.8% loss in only 10 days. Is a 10-day pullback commensurate to a 15-month rally? Not really!

The Conclusion (and Solution)

After looking at dozens of different indicators and patterns, the February 11 Profit Radar Report concluded as follows:

We’ve been looking to buy the dip. Is this the dip to buy? When boiling down all our indicators to a few sentences, we find that a bounce from Friday’s (February 9) low is probable. The bounce however may turn into a period of range-bound up-and-down market action, not an immediate directional up move. A path similar to 2011 (retest of original panic low). Hopefully volatility in coming days/weeks will provide a better (lower) entry.”

Find out which low-risk sector ETF the Profit Radar Report recommended on February 11.

The chart below compares the 2011 correction with the 2018 pullback (blue box). In 2011, it took 25 days before the S&P tested (and briefly exceeded) the initial panic low. A similar pattern is developing now.

Here are 3 factors to keep in mind:

  1. This wave 4 correction does not have to exceed the February low to be complete
  2. Due to the duration of the preceding rally, this wave 4 correction could last longer than in 2011
  3. In 2011, it took almost 5 months for the S&P to rally from the its low to a new high

The March 24 Profit Radar Report outlined the ideal path going forward along with target levels and an actual price projection.

Naturally we will be alert for curveballs (one of which is over the top bearish), but if the S&P 500 follows our ideal path reasonably close, it should set up a solid buying opportunity.

Continued updates and analysis 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.

 

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S&P 500 Update

The February 11 Profit Radar Report featured the chart below and stated that: “Based on Elliott Wave Theory, wave 3 is followed by wave 4, which is where we are currently at. Waves 4 are generally choppy, range-bound, long-winded, unpredictable corrections that retrace ideally 38.2% of the preceding wave 3. The 38.2% Fibonacci retracement level is at 2,536 (reached on Friday). In terms of price, wave 4 has already reached its down side target. In terms of time, wave 4 would be unusually short.”

After hitting 2,536 on February 9, the S&P 500 rallied as projected by this chart shown in the February 8 Profit Radar Report (Tuesday’s high at 2,789 was a bit higher than outlined in the last S&P 500 update).

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.

It is possible to count 5 waves up from the February 9 low to the February 27 high.

A 5-wave rally is always followed by a pullback, that’s why the February 25 Profit Radar Report mentioned the possibility of a ‘false breakout.’ The chart below shows the wave labels and common Fibonacci retracement support levels (particularly applicable for scenario #1).

Bigger Picture

The two charts below outline how the rally from the February 9 low and the decline from the February 27 high may fit into the bigger picture.

Scenario #1 assumes that wave 4 completed on February 9. The rally from February 9 – 27 is wave 1 of wave 5. Wave 2 of wave 5 is now underway (see hourly chart for common retracement levels for waves 2).

Scenario #2 projects an ongoing, choppy wave 4 correction and eventual retest of the February panic low.

Both scenarios have a common denominator: New highs once the correction is complete. The shape of the decline should tell us which scenario we’re dealing with.

Summary

Barring a low-odd waterfall decline, the weight of evidence suggests a buy the dip approach.

Continued updates with down side targets 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.

 

Dollar, Euro, Gold Update

Dollar Update

The January 2 Profit Radar Report published this chart and long-term US Dollar Index forecast:

The US Dollar Index could be at or near the end of a 5 ½ year rally. As per Elliott Wave Theory, it is possible to count 5 waves up from the May 2011 low. There are bearish divergences at the December highs, and investor sentiment is in favor of a lower dollar. We are alert for a potential multi-month US dollar decline.”

As it turns out, the US Dollar Index actually peaked on January 3, and spent the next 8 months falling lower.

In August/September we were expecting a bottom, but at the time we were not sure how big of a bounce to expect.

In November it became clear that the rally from the September 8 low to the October 27 high was only 3 waves, a first indication that the dollar bounce was over (a 5-wave move higher would have marked a trend change according to Elliott Wave Theory).

The chart below reflects the most likely Elliott Wave Theory count, which projects a more significant low in early 2018.

Smart money dollar hedgers are near record long the dollar, which could lead to a more sustainable rally even before the dollar reaches new lows (a solid close above 95 prior to a new low would suggest that the wave 5 low is already in).

However, hedgers are often early and may become even more bullish in the coming weeks. The lower the dollar falls, the better the buy signal.

Corresponding long dollar ETF: PowerShares DB US Dollar Bullish Fund (UUP)

EUR/USD (Euro)

The euro (EUR/USD) generally moves in the opposite direction of the dollar.

Since the above dollar analysis provides a multi-month forecast, we’ll use the EUR/USD for a short-term outlook.

On November 14, the EUR/USD broke above the black trend channel, and re-tested that channel on November 21 (blue circle).

The November 20 Profit Radar Report said that: “The EUR/USD is near support around 1.17. This could serve as springboard for new recovery highs.”

We now expect a rally above 1.21. The gray trend channel provides some short-term support/resistance levels. Trade should not drop below 1.17.

RSI appears unlikely to confirm new highs above 1.21, which would harmonize nicely with our expectation of a larger pullback.

Smart money euro hedgers, however, are nearly record short the euro, which will draw the euro down eventually. We’d love an opportunity to short the euro above 1.21 against a bearish RSI divergence.

Corresponding inverse euro ETF: ProShares UltraShort Euro (EUO)

Corresponding euro ETF: CurrencyShares Euro Trust (FXE)

Gold

This September 28 article included a detailed long-term outlook for gold.

The October 4 Profit Radar Report said all there was to know about gold for the weeks to come: “Support for gold is at 1,245 – 1,260. Resistance is at 1,298 – 1,304. For now, gold is likely to trade between support and resistance.”

Gold is pushing the upper boundary of the outlined trading range, but thus far there’s been no breakout. Silver failed to confirm gold’s push higher, which can be a warning signal. On balance volume has been increasing, which is a positive. Nevertheless, we would view a break above 1,307 with suspicion.

Corresponding gold ETFs:
SPDR Gold Trust (GLD)
iShares Gold Trust (IAU)

Corresponding inverse gold ETFs:
ProShares UltraShort Gold (GLL)

Continued forecasts for the US Dollar, EUR/USD, gold and silver 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.

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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.

Gold Tug-of War: Mid-term Bullish vs Short-term Bearish

Gold has been zigzagging up and down for all of 2017. This erratic performance brings a measure of uncertainty, but – in a way – it also increases confidence in our long-term forecast.

Starting in November 2015, the Profit Radar Report expected a sizeable gold rally.

The November 30, 2015 Profit Radar Report published the chart below, which shows gold at quadruple support and record bullish smart money hedgers. An ideal setup for a rally (gold’s final low occurred on December 3, 2015 at 1,045).

The second chart shows the Elliott Wave Theory (EWT) labeling we’ve been following for the past years.

According to EWT, the first wave (comprised of five sub-waves) of the bear market ended in December 2015. The rally since is a counter trend move.

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

Common Fibonacci target levels for this counter trend rally are 1,381, 1,485 and 1,588. Counter trends are generally more choppy and less predictable, which is true of the rally from December 2015 to September 2017 (this increases confidence in our forecast).

Since we were looking for a move above 1,382, the Profit Radar Report issued a buy signal for gold and gold ETFs like the SPDR Gold Shares (GLD) in November 2015 (gold at 1,088), and in August 2017 (gold at 1282).

On September 8, 2017 gold became overbought and touched the top of the black trend channel. Smart money hedgers (which were record bullish at the December 2015 low) turned significantly more bearish (see daily chart).

For those reasons, the Profit Radar Report issued a sell signal on September 5, 2017.

We don’t have a down side target for the current pullback (yet), but the lack of a bearish RSI-divergence at the September 8 high and failure to reach or exceed Fibonacci resistance at 1,381 suggests gold will take another stab at new recovery highs.

The daily chart insert illustrates gold seasonality for the remainder of 2017.

The Profit Radar Report will continue to monitor technicals, Elliott Wave patterns, sentiment, seasonality and cycles to confirm (or invalidate) our preferred forecast and spot low-risk buy or sell entries.

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

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.