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).

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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.

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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.”

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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.

 

 

Short-term S&P 500 Forecast

Here is a brief excerpt from Sunday’s (November 15) Profit Radar Report (PRR), which highlighted the key short-term S&P 500 level to watch … and much more:

“The S&P 500 chart is painting a truly fascinating constellation. First we’ll take a look at the two most likely outcomes, than we’ll discuss probabilities.

The S&P couldn’t get off the mat at 2,040, which resulted in a drop to 2,022, as proposed in the November 12 PRR.

2,021 is a special support level. Why? (see blue bubbles)

  • It’s the September spike high
  • It acted as support/resistance in October
  • It is the 38.2% Fibonacci retracement level of the rally from the August 24 low to the November 3 high.

Elliott Wave Theory is another facet adding to the allure of the 2,021 level. The S&P rallied in a discernable 3-wave pattern from the August 24 low (black numbers).

If the rally from the August low is a counter trend move, it likely ended on November 3 at 2,116.48. If that’s the case, the S&P should work its way towards and perhaps beyond the August low (red arrow).

If the rally from the August 24 low wants to turn into a 5-wave move, the rally is likely to continue next week. If that’s the case, the decline from the November 3 high is a wave 4 correction, followed by a wave 5 rally to new highs (green number + green arrow).

Based purely on chart analysis, both scenarios are equally viable.

The CBOE Equity Put/Call Ratio (dark blue – bottom graph) shows that option traders are bearish to an extreme.

S&P 500 seasonality (light blue – top graph) is predominantly bullish for the remainder of the year.

S&P 500 futures are currently down 8 points and were down as much as 20 points in Sunday night’s trade. If weakness continues overnight, the S&P 500 cash index may open below 2,020 in the morning.

Stocks are oversold and a gap down open could easily be reversed. Just as it wasn’t smart to chase the up side in early November, it isn’t prudent to chase the down side at this moment.

We will consider going long the S&P if it drops below 2,020 and subsequently closes above 2,020.”

The green bars show the performance since Sunday. As suggested by the CBOE equity put/call ratio and seasonality, the S&P 500 bounced from key support at 2,020.

The simplified conclusion is that the path of least resistance is up as long as support at 2,020 holds.

A break below 2,020 does not necessarily have to be bearish, but it would complicate the structure and possibly result in a whipsaw across 2,020

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the publisher 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 and 17.59% in 2014.

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

 

What’s the Nasdaq’s Upside Target?

Despite a dismal start into 2014, the Nasdaq-100 has taken out its January high and is trading at the highest level in 14 years. Is the sky the limit? Here are two price targets that may act as resistance and keep a lid on the advance.

The Nasdaq-100 just rallied to a new 14-year high and the sky seems the limit. But what’s a more realistic limit or target?

Here are some developments worth considering:

The first chart shows the Nasadaq-100 Index, better known by its ETF reflection, the Nasdaq QQQ ETF (Nasdaq: QQQ).

The Nasdaq-100 initially stalled at the first red line, which corresponds to the October 2000 monthly high (3,614).

The Nasdaq-100 closed above 3,614 this week. Technically, the sky is clear to the next important resistance level, which is the 78.6% Fibonacci retracement of the points lost from 2000 – 2000, located at 3,956.

The Nasdaq Composite (Nasdaq: ^IXIC) is already within striking distance of its 78.6% Fibonacci retracement at 4,246.55.

As the two charts illustrate, only the Nasdaq-100 rallied to new highs this week. The broader Nasdaq Composite has not yet taken out its January high watermark.

This minor bearish divergence could weigh down the near-term performance. Even if the Nasdaq Composite continues higher, it will still have to deal with Fibonacci resistance at 4,246.55.

The U.S. stock market universe extends beyond the two Nasdaq indexes.

Although the Nasdaq charts suggest at least marginal gains, there’s still reason to be suspicious of this powerful bounce.

The February 5 Profit Radar Report featured this projection (yellow lines) for the S&P 500 (SNP: ^GSPC).

The S&P 500 chart projection provided a visual of the February 3 forecast: “Even though today was a rare 90% down day (90% of all stocks traded closed lower) there was a bullish RSI divergence. This suggests that selling pressure is subsiding. Ideally, the market will deliver another minor up/down wiggle before staging a larger bounce.”

The proposed S&P 500 bounce has nearly reached the projected target, so risk is increasing.

For what to expect next (short-term and long-term) and the key line in the sand between bearish risk and bullish opportunity refer to the Profit Radar Report. A detailed 2013 performance report of the Profit Radar Report and a 2014 forecast preview are available here:

Not Your Average 2013 Performance Report

Simon Maierhofer is the publisher 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.

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

Most Despised Sector is Leading Charge into Correction Zone

posted on iSPYETF on 11-23-2013

The Financial Select Sector SPDR ETF (XLF) is leading the charge to new (recovery) highs. Unlike the major market indexes, XLF is still having to deal with overhead resistance, such as this solid Fibonacci level.

People dislike injustice and QE is a blatant display of injustice. The Federal Reserve is helping out big banks while the little guy is left holding the bag.

Whether we like it or not, the financial sector is leading the latest charge to new all-time highs for the Dow Jones and S&P 500.

The Financial Select Sector SPDR ETF (NYSEArca: XLF) has broken above resistance provided by the September 2001 low and is heading for the next technical milestone – the 50% Fibonacci retracement (see XLF chart below).

The 50% Fibonacci retracement at 22.01 was isolated as target for this rally in my July 12 analysis of the XLF ETF.

Despite recent strength, the Financial Select Sector SPDR ETF still hasn’t even recovered 50% of the points lost from 2007 – 2009.

As of today, the Financial Select Sector SPDR ETF is about 2% away from the 50% Fibonacci retracement.

The SPDR S&P Bank ETF (NYSEArca: KBE) is about 5% away from its 50% Fibonacci retracement.

Does this Fibonacci level matter? The XLF chart chronicles how the financial ETF responded to the 23.6% and 38.2% Fibonacci levels.

The interaction with the 23.6% level was intense and saw a number of tests. The 38.2% level halted XLF’s advance just briefly.

It would be reasonable to expect some sort of reaction to the 50% Fibonacci level.

It’s a good idea to keep an eye on XLF (and KBE) here as the financial sector accounts for 16.19% of the S&P 500 (NYSEArca: SPY). This doesn’t mean that the tail wags the dog, but the performance of XLF and KBE may provide a sneak peek for what’s next for the S&P 500.

At the same time, the Dow Jones is reaching the long-term target we called for many months ago … and it’s not Dow 16,000.

Reaching this Dow target has been more than a decade in the making: Forget Dow 16,000 – Here’s the Real ‘Bubble Popper’

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report uses technical analysis, dozens of investor sentiment gauges, seasonal patterns and a healthy portion of common sense to spot low-risk, high probability trades (see track record below).

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

 

Nasdaq Reaches Long-Term Double Fibonacci Target – Now What?

In May the Profit Radar Report highlighted a long-term price target for the Nasdaq-100 made up of two Fibonacci levels. This week the Nasdaq reached this target. Is this bullish or bearish?

As a market forecaster, I’m obsessed with finding the next resistance cluster that will serve as target for the next rally.

This resistance cluster for the Nasdaq-100 (Nasdaq: QQQ) was fairly easy to spot as it was made up of two long-term Fibonacci levels.

The May 19, Profit Radar Report said this about the double Fibonacci target:

Real serious overhead resistance doesn’t come into play until 3,266 – 3,280. That’s 8% away and it should take at least one noteable correction and several more months to get there.”

Several months (and a few minor corrections) later the Nasdaq 100 has arrived and slightly exceeded 3,280.

The Nasdaq-100 chart below shows the 61.8% Fibonacci retracement of the points lost from 2000 to 2002 (at 3,280.29) and a Fibonacci projection level originating from the 2002 low is at 3,266.

Now What?

Quite frankly, I thought that the odds of a major market top once the Nasdaq reaches 3,280 were greater than 50%. But I may have to reconsider this expectation or at least put it on hold for now.

A close above such key resistance is generally bullish. Unfortunately, I have a hard time finding another resistance cluster for the Nasdaq. The 78.6% Fibonacci retracement is still 20% away and premature.

De-Isolating the Nasdaq

The Nasdaq doesn’t trade in a vacuum and it often helps to see what other indexes are doing.

The S&P 500 (SNP: ^GSPC), which sports a well-defined trend channel right now, is considerably closer to its trend channel resistance than the Nasdaq-100 to its 78.6% Fibonacci resistance.

The Dow Jones (DJI: ^DJI) is almost trading in its own world right now. A big earnings disappointment by IBM – the biggest Dow component – sent the Dow marginally lower on Thursday while the S&P 500 (NYSEArca: SPY) and Nasdaq closed higher.

Summary

For now the Nasdaq is above support (prior resistance) and the trend is up. In fact, the Federal Reserve and Washington politicians have created a ‘chaos environment’ that could keep prices buoyant for significantly longer.

However, not everything is hunky-dory. The S&P 500 is about to hit resistance that may reject this advance. Two long-term cycles, which predicted the 2000 and 2007 tops, project another market top in 2013/2014. Click here for more details on the S&P 500 cycles.

My take on the market along with a forecast based on technical analysis, sentiment and seasonality is available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report.

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S&P 500 Hits Head-and Shoulders Target

There are times when short-term charts offer little to no guidance, and there are times when a chart just oozes with valuable clues about the market’s whereabouts. The later is true right now. Head-and shoulders, Fibonacci, trend lines, etc., this chart has it all.

Sometimes a picture is truly worth more than a thousand words.

The hourly S&P 500 (SNP: ^GSPC) chart below is jam-packed with interesting clues.

1) There is a head-and shoulders topping pattern with a neckline at 1,681. Several trend lines converging at the same area reinforce the importance of the neckline.

The setup was so plain that the August 14 Profit Radar Report recommended to go short with a move below 1,681.

2) The target of a head-and shoulders breakdown is determined as follows: Calculate the difference between the head (1,709) and the neckline (1,681) and project it to the down side (1,652). The head-and shoulders target is 1,652, which the August 15 Profit Radar Report outlined as initial down side target.

3) As the chart shows, 1652 is also the 38.2% Fibonacci retracement of the points gained from June 24 to August 2. 1,652 is thus an important support/resistance level.

4) There are two open chart gaps (dashed pink lines).

What happens if the S&P 500 (NYSEArca: SPY) falls and stays below 1,652? It will probably continue south until the next support level.

It’s interesting to note that the VIX (Chicago Options: ^VIX) created a similar head-and shoulders formation with an up side target around 15. This up side target was reached as well.

The Nasdaq-100 (Nasdaq: QQQ) – buoyed by Apple – could care less about head-and shoulders patterns as it may be worried about its open chart gaps.

Conclusion

The S&P 500 (NYSEArca: IVV) is clinging to the 1,652 level. If it fails to hang on, it will drop to the next support level. On the flip side, there are open chart gaps at much higher prices.

Sunday’s special Profit Radar Report takes a detailed look at seasonality (both the S&P 500 and VIX), sentiment (8 different sentiment/money flow gauges), technical analysis, and Elliott Wave Theory and visually projects the two most likely paths stocks will take over the coming weeks.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow him on Twitter @ iSPYETF.