S&P 500 Update

In mid-January, I asked: Is the ‘Bear Market’ Already Over?

The above article highlighted bearish (bullish for stocks) sentiment extremes, the average bear market trajectory (which projected a rally), and – most importantly – a bullish breadth thrust.

Therefore it’s no surprise that stocks continued higher. What is surprising (at least to me), is that they did so without any real pullback. Strong momentum overrode any pullback attempts.

This is highly unusual.

The January 30, 2019 Profit Radar Report stated that: “Based on the most likely Elliott Wave Theory count, upcoming gains should be choppy as waves 4 and 5 of various degrees unfold.”

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 market sure has been choppy, but continues to grind higher.

This comment in the February 12 Profit Radar Report highlights the conundrum of whether to chase price or not (back then and today):

The S&P 500 is on the cusp of breaking above resistance, and based on after-hours action is likely to do so tomorrow. Forward looking indicators (like Elliott Wave Theory) suggest this rally leg will relapse, but momentum and the technical breakout could over-power future expectations in real time.

I recommended an official buy limit order for the SPDR S&P 500 ETF (SPY), but later down graded it to a buy recommendation for aggressive investors only.

The S&P 500 has now arrived at another juncture.

The S&P 500 futures chart shows that 2,812 – 2,818 is important. Sometimes important price levels are subject to a brief seesaw.

In fact, there’s a pattern right now that – if in place – projects a pop and drop.

I’ve seen a couple of those patterns fail recently, so in order for the pop and drop pattern to gain teeth, the S&P will have to pop above resistance and thereafter drop below resistance.

If that happens, the down side risk could be quite significant.

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 – Know What to Expect

It’s said that we shouldn’t blame others for disappointing us, but to blame ourselves for expecting too much. The same is true for the stock market.

Expect the Unexpected

Many investors have become disenchanted as stocks are stuck in a rut. But the market always does what it does, it’s our job to manage what we have control over; our expectations. Thanks to the media and their sensationalistic headlines, investors have been waiting for either a crash or the next rally. For example:

CNBC: Market volatility is reminiscent of the 1987 crash – April 5
CNBC: Stock market looks ‘pretty fantastic’ – April 23

Headlines like: “Correction will continue,” simply don’t capture eyeballs or sell newspapers. The Profit Radar Report’s job is to give subscribers an idea of what’s ahead, not to wow them with catchy (but unrealistic) predictions.

Boring Truth

Back on February 11, the Profit Radar Report warned of extended sideways action. In fact, a multi-month range-bound chop fest was the most logical scenario (why was explained in detail here). This turned out to be the boring truth.

In early April, the S&P 500 got close to our ideal requirements for a sustainable low. Although the Profit Radar Report recommended to buy the SPDR S&P 500 ETF (SPY) on April 3 (when the S&P traded around 2,580), we didn’t fully trust that low (the actual Profit Radar Report updates surrounding the April 2 low have been made available for review here).

Following the April 2 low, the S&P 500 rallied more than 250 points, but there were still doubts about the rally’s longevity. The April 15 Profit Radar Report stated that:

Price continues to grind higher, but it’s doing so without real conviction. The chart below shows the 3 most likely scenarios going forward:
1) Drop towards (and below) 2,533, followed by the next rally leg (red).
2) Blue diagonal: Grind above S&P 2,700 followed by another pullback and next rally leg.
3) Purple triangle: Continued range racing and eventually the next rally leg.”

Although the exact path was unknown, all 3 scenarios had one thing in common:

S&P 500 pullback into a (hopefully) more sustainable low. That’s why the Profit Radar Report stated: “We want to buy into weakness rather than chasing stocks.”

The weakness materialized. The question is how much more weakness we’ll see.

At this point we are assessing the odds of each scenario, but one thing is for certain:

The lower the S&P drops, the better the risk/reward potential investors going into the next rally leg.

Short-term, the S&P 500 is nearing trend channel support while oversold.

Continuous S&P 500 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.

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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.

 

Short-term S&P 500 Outlook

Tunnel vision is almost always a risky approach to investing, however, this is one of those rare times where tunnel vision is actually the best way to go.

With tunnel vision I mean focusing on the (only) indicator that’s been working, and tuning out all other indicators.

Elliott Wave Theory (EWT) has been the indicator deserving of investors’ focus. EWT (interpreted correctly) has persistently pointed to higher prices.

Months before the Trump rally, EWT strongly suggested a S&P 500 rally into the mid 2,300s and higher (original price projection was published here: S&P 500 Update – Expect the Abnormal).

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.

Short-term Outlook

The December 14, 2016 Profit Radar Report expected a prolonged period of sideways trading, and after over a month of ‘go nowhere’ action, the January 29 Profit Radar Report stated that:

The sideways trading since Wednesday looks to be wave 4 with a possible down side target of 2,280 – 2,290 (open gap at 2,284.63). Based on the bearish divergences the S&P may peel lower, but based on EWT there’s a good chance the S&P will find support in the 2,280 – 2,290 range and rally into the low-mid 2,300s.”

We now know that EWT prevailed over bearish divergences and rallied into the EWT-based up side target mentioned in February 5 Profit Radar Report:

The S&P 500 moved above 2,290 on Friday. Measured EWT-based up side targets are in the 2,320 – 2,370 zone. Various bearish divergences (RSI-35, stocks above 50-day SMA) and near oversold condition still suggest some caution.”

No Can Do Tunnel Vision

To maintain a diversified research and forecasting approach, the Profit Radar Report looks at the most potent indicators and never relies solely on any one indicator.

Today’s push to new all-time highs erased (almost) all larger bearish divergences, and synchronizes EWT more with many other indicators (only cycles are short-term bearish).

The weight of evidence points to more strength ahead (2 steps forward, 1 step back, as outlined by the January 4 Profit Radar Report). Any pauses caused by overbought conditions or investors sentiment should be short-term in nature.

Next resistance (and chance for a pullback/pause) is around 2,342. Support is at 2,320, 2,300 and 2,285 (see chart).

At some point in 2017 however, we should see either a major market top or a 15% correction. More detail is available in the multiple-indicator based 2017 S&P 500 Forecast.

Popular S&P 500 ETFs include:

  • SPDR S&P 500 ETF (SPY)
  • iShares S&P 500 ETF (IVV)
  • Vanguard S&P 500 ETF (VOO)

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 and Nasdaq Reveal Priceless Clues

For the past couple of months we’ve stuck to our short-term bearish and mid-term bullish outlook (the mid-term bullishness may morph into long-term bullishness).

This means, we’ve been buying dips, but refusing to chase trade to the up side.

We got the first buyable dip on September 9. Between September 9 -13 we bought the SPDR S&P 500 ETF (SPY), iShares Russell 2000 ETF (IWM), and VelocityShares Short-term VIX ETN (XIV).

1st Tell Tale Sign

However, the September 20 Profit Radar Report warned that: “In February and June stocks produced a breadth thrust from their low. Thus far however, the S&P 500 hasn’t shown any convincing follow through to the up side. The odds of soaring without a prior test or break of the lows have diminished. We are taking some chips off the table.

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.

Over the next few days, we sold IWM and XIV for gains of 2.33% – 14.46%. We continued to hold SPY in case stocks move higher, but closed that position at breakeven on October 4.

The chart below, initially published in the September 11 Profit Radar Report, shows the potential down side targets based on Fibonacci retracement levels.

Ultimately, the scope of this correction depends on whether stocks will retrace the gains since the February low (S&P: 1810) or June low (S&P: 1,992).

We believe the retracement will be more on the shallow side, that’s why we bought the first buyable dip in September.

2nd Tell Tale Sign

The October 2 Profit Radar Report highlighted a concerning Nasdaq constellation: “The Nasdaq-100 and QQQ ETF are near trend channel resistance, and perhaps more importantly, near Fibonacci resistance and the 2000 all-time high (RSI and Nasdaq stocks above their 50-day SMA did not confirm this high). We expect new all-time highs later this year, but if QQQ is going to take a breather, it could be around 120+/-.”

Yesterday (Monday), QQQ matched the September 22 all-time closing high at 119.48, but RSI deteriorated even further, a bearish omen.

3rd Tell Tale Sign

Although the S&P 500 was stuck in a triangle with lower highs and higher lows, internal strength was wilting (the McClellan Oscillator and Summation Index made lower lows – see bottom graphs). The chart below was published in the October 9 Profit Radar Report.

Summary

It seems like stocks want to correct further before moving higher. This correction could stop in the 2,120 – 2,100 zone, but it could also go quite a bit lower.

We will be looking to buy the dip, because a number of indicators suggest a strong rally following this correction.

When we buy, depends on the structure of the decline, bearish sentiment extremes, and whether we see bullish divergences. The Profit Radar Report already identified a beaten down low-risk value ETF and an aggressive high octane ETN with a built in safety cushion to take advantage of the year-end rally.

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 – Refocus on What Matters

Brexit! What Brexit? The Brexit reaction doesn’t even register on the monthly S&P 500 chart. ‘A tempest in the teapot’ as the British would say. This is yet another example why we do not focus (and sometimes ignore) news events.

The Brexit vote did cause undeniable ripple effects, but only temporarily. It’s time to tune out the noise and stop using Brexit as excuse or cause for everything that happens.

As the headlines below show, Brexit can’t be savior and scapegoat at the same time:

  • Morningstar: Stocks Climb as Investors Shake off Brexit Concerns
  • MarketWatch: US Stocks Open Lower as Brexit-Inspired Selloff Continues
  • MarketWatch: Dow Ends up 270 Points as Brexit Fears Abate
  • Morningstar: Stocks fall as Brexit Worries Resurface

Chart Analysis

The June 19 Profit Radar Report expected a temporary drop to 2,002 – 1,928 followed by a resumption of the rally. The ideal down side target was 1,970 – 1,925 (original chart is available here).

Barron’s rates iSPYETF as a “trader with a good track record.” Click here for Barron’s assessment of the Profit Radar Report.

The structure of the post-Brexit selloff confirmed that the decline would turn out to be temporary. In a section titled “Chart Gaps and Major Market Tops” the June 26 Profit Radar Report noted open chart gaps and stated the following:

Following a tumultuous night, the SPDR S&P 500 ETF (SPY) opened Friday 3.42% lower than Thursday’s close (see chart). Since the inception of SPY (1/22/1993), there’ve only been 7 bigger gap down opens, and a total of 11 opening gaps with losses in excess of 3%. Five days later, the S&P traded higher 10 out of 11 times with an average post gap gain of 4.96%.

One of the reasons we continuously anticipated new all-time highs in recent years were open chart gaps left near the top. This is again the case now. There are open gaps at 2,104.57 and 2,117.96”

On June 27, the S&P fell as low as 1,991.68. This was in the general target zone, but short of our ideal target zone at 1,970 – 1,925. Nevertheless, the June 27 Profit Radar Report stated that: “two separate price patterns suggest a bounce is brewing.”

Initially, we anticipated this bounce to be choppy and relapse into the ideal 1,970 – 1,925 zone, but as the June 29 Profit Radar Report brought out, “this bounce has been stronger (in terms of breadth) than it was ‘supposed’ to be. Preliminary data suggests that the S&P may be experiencing a breadth thrust similar to what we saw in mid-February (see February 21 PRR). Based on the strong kick off from Monday’s low, we must consider the possibility that a more lasting low is already in.”

The February kickoff analysis, originally published in the February 21 Profit Radar Report, is available here: 2016 Bear Market Risk is Zero Based on this Rare but Consistent Pattern

Summary

Last week’s kickoff rally suggested a short-term digestive lull (with initial support near 2,070) followed by higher prices eventually. However, we never put all our eggs in our basket. No matter how compelling last week’s breadth thrust is, we are waiting for price to meet our parameters (buy triggers) before going long.

Until this happens, we may see more choppiness, and even more down side (although unlikely). 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.