Are Stocks Breaking Out?

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on January 26, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Stock market bears are getting squeezed again this week as the S&P 500 grinds higher. And, for the first time in a year, the S&P closed above the descending trend line. The color of that trend line is now green, because it’s support. As long as this support holds, price can continue higher.

This week’s push above last week’s high eliminated the most bearish of Elliott Wave patterns (a nested wave 3 decline proclaimed by a number of Elliotticians). The red lines show other highs. Every time one of those highs is eclipsed, bears’ hopes sink.

Perhaps more important is the dashed purple line. It’s an open chart gap left by the 9/13/22 drop. Ever since then I’ve been talking about that chart gap being closed (most recently here: 2023 S&P 500 Forecast).

Unlike the S&P, the recent IWM peaks are all clustered in the 189.50 neighborhood. IWM needs to break above this zone – confirmed by RSI-35 – to allow the S&P to move higher as well. Without IWMs support, risk of a pullback remains present.

I stated in the December 28 Profit Radar Report that: “TSLA has been in crash mode, with the December meltdown likely being part of a wave 3. The long-term chart shows there’s no significant support near current price. Perhaps a temporary bounce and eventual drop to 100 +/- could set up a more sustainable bounce.”

Shortly thereafter, TSLA fell as low as 101.81 and is up over 50% since. While this bounce could be only a wave 4, it’s likely a larger degree bounce with higher targets (as long as price stays above the green support line).

2023 S&P 500 Forecast

This is the time of year where I’m working on the full year S&P 500 Forecast. This forecast includes the most pertinent facts and indicators and an actual price projection based on those indicators.

The proof is in the pudding and the chart below plots my 2022 S&P 500 projection (yellow line) against the actual price action (you can see the original projection at the bottom of this page).

The full S&P 500 Forecast is available here for your review.

Below are some of the warning signs mentioned in the 2022 S&P 500 Forecast BEFORE the stock market fell into a pothole:

– “The bearish divergence (NY Composite a/d lines) reappeared again at the January 2022 S&P 500 highs. This internal market deterioration is a concern and a warning sign.”

– “The 6-month average of Titanic signals exceeded 25. It’s been a good bear market indicator. Although the majority of breadth studies are positive, this is one that should not be ignored.”

– “We’ll focus on the commonality of all 3 (Elliott Wave Theory) scenarios: Up side is limited and down side risk is increasing.”

– “Trend line resistance is around 4,915. We do not expect the S&P to break above this trend line in 2022.”

– “Short-term, the January 10, 2022 low at 4,582 is important. Failure to hold above this level would be a warning signal with the potential for a quick drop into the 4,200 – 4,300 range. If the 4,200 – 4,300 support zone fails, a test of the 4,000 zone (as low as 3,700) is possible.”

– “2022 is the mid election year, which is the weakest of the 4-year presidential election year cycle. Historically (going back to 1950), the S&P 500 declines on average about 20% into the mid-term election year low.”

– “Since the Fed is planning to unwind and reduce purchases (and shrink its balance sheet) in 2022, the risk of a more serious correction this year is much greater than in 2021.”

To receive the 2023 S&P 500 Forecast and for continued updates and purely fact based research, sign up for the Profit Radar Report. 

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”tock

Bearish S&P 500 Pattern Still Looms

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on September 15, 2022. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Not much has changed since the last free Free Market Outlook (S&P 500 Reverses at Upside Target, Aug. 25).

Below is an updated version of the chart shown on August 25 and many times before. The S&P 500 tagged trend line resistance (of a pattern called expanding diagonal) and reversed.

The reaction to resistance is in line with what I anticipated in the July 31 Profit Radar Report:

“The purple lines outline an expanding diagonal (resistance around 4,350). The textbook blueprint for this diagonal would be to tag the purple line and then fall.“

The down side target for the expanding diagonal is pretty aggressive (and and seemed even more aggressive when the S&P 500 tagged resistance around 4,350). When I wrote the last free Market Outlook, back in August, I wasn’t willing to commit to that down side target. Why?

The rally from the June low triggered a number of bullish studies. One of those was that the percentage of stocks above their 50-day SMA cycled from below 2% to above 90%.

This rarely happens, and when it does it’s a good thing for stocks. The chart below shows 8 other signal clusters when the % of S&P 500 stocks above their 50-day SMA cycled from below 10% to above 90%. All of them were long-term bullish, and most of them also sparked short-term gains.

Did anything change since then to make you commit to a down side target? Yes something did change.

I noted a bearish overlap (according to Elliott Wave Theory) and pointed it out in the August 31 Profit Radar Report:

“One of the things we were watching is the overlap level at wave 1, which is 3,950 for the S&P 500 Futures. It looks like the rally from the June low ended after only 3 waves, and the decline from the August high looks like a developing 5 waves, neither of which is bullish.”

This bearish overlap is highlighted by the dashed red line seen in the first chart, and partially because of this overlap, I recommended the following in the September 5 Profit Radar Report:

“An over-sold bounce seems likely soon, and it’s prudent to use this bounce to reduce exposure.”

We reduced exposure last Friday, when S&P 500 soared with 91.74% of trading volume flowing into advancing stocks (this was the fifth 90%+ up volume day since the June low).

The chart below highlights every 90%+ up volume day. It was almost always long-term bullish for stocks.

However, just two days later, on Tuesday, 95.86% of volume went into declining stocks.

Fortunately the weight of evidence suggested to sell into strength, short term.

What about longer-term? Does Tuesday’s extreme down day void the bullish implications of the strong up volume days? Is the aggressive down side target of the expanding diagonal on the table?

Answers based on the weight of evidence (and I consider a ton of evidence) is available via the Profit Radar Report. 

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”&P 5

S&P 500: August Highs Make Investors Cry

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on September 9. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

The S&P 500 finished August perched on an all-time high (ATH). In the past, August highs have often made investors cry.

Since 1970, the S&P carved out 12 other August ATHs (it set a 6-year high in 1979 and missed a new ATH by a few tics in 1984). All 14 signal dates (starting with the first day of September) are shown and highlighted below.

It’s tough to cram 50 years of history into one chart, but we can still see that August ATHs preceded some challenging times (i. e. 1972, 1987, 2000, 2014). Let’s drill a bit deeper.

The chart below shows the S&P 500 forward performance starting with the first day of September. The 5 instances since 2000 are shown in yellow, the 9 instances prior to 2000 are shown in gray. 2020 (in red) shattered all precedents with the exception of 1986.

As the performance tracker (bottom table) shows, returns for the next 1 – 3 months have been dismal.

The above study was just 1 of 3 studies published in Monday’s Profit Radar Report, which also featured the latest Risk/Reward Heat Map (a visual tool that shows risk based on 100s of studies).

Stocks have been immune to any kind of risk projection so we need price to verify risk with a drop below support.

Below are some basic levels to help judge risk and reward. The Nasdaq QQQ ETF is up against resistance. It will take a break above resistance to unlock higher prices (perhaps a blow off top).

DJIA is stuck in a potential wedge. A move above and back below upper wedge resistance would be a warning signal, as would be a good close below the lower wedge line.

Monday’s Profit Radar Report showed the below Bitcoin Futures chart and pointed out that price is against resistance while over-bought, which meant short-term risk was elevated. Within hours, Bitcoin dropped 10,000 points, nearly 20%. This general bias is likely positive as long black trend channel support holds.

Continued updates, out-of-the box analysis and forward performance based on historic precedents are available via the

Continued updates and factual out-of-the box analysis are available via the Profit Radar Report. 

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

S&P 500 – Strong but Ugly

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on May 6. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Let’s face it, S&P 500 performance has been strong but ugly … and downright boring to watch. Despite the yawn environment, I just discovered a historic pattern that played out 90% of the time (see below).

Yes, while markets are grinding I’m running dozens of screens to gain an edge for the next move.

For example, the last S&P 500 all-time high (last Thursday) also saw:

– Cumulative NY Composite a/d lines at all-time highs

– 88% of S&P 500 stocks above their 50-day SMA

– 95% of S&P 500 stocks above their 200-day SMA

– Only 58% of volume flowing in advancing stocks (10-day SMA)

Running a screen based on the above parameters yields no hits, which means it never happened before.

We can’t learn much from a sample size of 1, but lowering the threshold gives as more precedents to work with.

The yellow lines highlight when less restrictive criteria (see chart) were met. Unfortunately the sample size couldn’t be more conflicting (don’t shoot the messenger). We have some signals right before the 2007 and 2020 crash and others during the 2013 and 2020 melt-up.

Let’s take a different approach. Instead of scanning for similar past occurrences based on breadth we’ll look at performance.

Here is our baseline:

1. From January – April 2021, the S&P 500 was up 11.32%
2. In 2020 (prior year), the S&P 500 recorded a 16.26% gain
3. 2021 was a post election year

Going back to 1970, we now identify the following:

– Years S&P 500 was up more than 10% on April 30

It happened 14 other years

– Years S&P 500 gained 16% +/-5% the year before

It happened 5 other years

– Years that were a post election year (like 2021)

It happened 1 other year

– Years with a similar chart trajectory (correlation)

Based on the above criteria, the gray graphs reflect the January – April performance of the 10 years most similar to 2021 (in red).

The logical next step is to chart the forward performance of the 10 most similar years, which is exactly what I did. After doing that, I look for common themes.

This study revealed an interesting commonality: 3 month later (which corresponds to August 1), the S&P 500 had the same directional bias 90% of the time. The full study was published in yesterday’s Profit Radar Report.

Even dull markets can offer clues about future performance … if you look hard enough … or have someone who does the searching for you.

Continued updates, out-of-the box analysis and forward performance based on historic precedents are available via the Profit Radar Report.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”SPX

S&P 500, Nasdaq, DJIA, Gold, Treasuries, TSLA Update

Even though every major index is marching to the beat of its own drum, it’s possible to see a common stock market theme. To help investors understand what’s going on, I’ve published below the entire February 28, Profit Radar Report update (which also includes analysis on gold, Treasuries and TSLA). Please notice how the summary section offers a cohesive forecast despite the market’s fragmented nature.

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

Profit Radar Report, February 28, 2021 (5:45pm PST)

Thursday and Friday delivered a whippy conclusion to the week. DJIA spent Thursday above trend line resistance but relapsed back below it Friday and painted a weekly reversal candle against the trend line. 

Nasdaq-100: Wednesday’s PRR showed the potential for a 5-wave decline (with wave 4 invalidation level). As the side-by-side comparison below shows, the Nasdaq-100 Futures did set a new low for a legitimate 5-wave decline. The Nasdaq-100 Cash Index however, did not.

The daily chart shows a break below trend line support. A backtest of the previously broken support (now resistance around 13,300) is quite common. A close back above the resistance cluster (blue oval) will pause any pullback and possibly rejuvenate this rally. 

S&P 500 Futures almost tagged the rising trend line from the March low (3,780) on Friday. The blue oval highlights a support cluster at 3,720 – 3,780. The decline from the high looks either like 3 waves (which suggests the pullback is already or nearly over) or a 1, 2 setup (which would point towards down side acceleration once this bounce is complete).

Summary: Every index is marching to the beat of its own drum, and there’s even discord between the same index’ cash and futures chart (Nasdaq). DJIA painted an ugly looking weekly reversal. Nasdaq Futures declined in 5 waves but Nasdaq-100 Cash only in 3 waves (Elliott Wave Theory explains the significance of 3 vs 5-wave moves). S&P 500 (cash and futures) looks like a 3-wave decline and the S&P 500 Futures decline paused at important trend line support. 

S&P 500 Futures support at 3,780 held and first-of-the-month liquidity inflows tend to buoy markets, so odds of a bounce to start the week are high. We would prefer for selling to resume after this bounce exhausts (ideally Monday or Tuesday), but a move above 31,600 for DJIA, 13,300 for Nasdaq-100 and 3,900 for S&P 500 could embolden buyers again and rejuvenate the rally.

Gold couldn’t make it above the 1,830 resistance cluster (blue circle, daily chart) last week and continued lower. 

The weekly chart shows strong support in the 1,700 area, which is where the 2020 melt up started. A dip into that zone, if it occurs, would likely spark a bounce. How strong of a bounce is to be seen.

Wednesday’s PRR mentioned that TLT is likely to bounce from the 134 – 140 zone. From Thursday’s low at 136.61, TLT bounced already 2% with futures action suggesting more follow through Monday morning. Initial resistance will be at 143.60 – 146, but the selloff was strong enough to cause an even stronger bounce.

TSLA: The January 10 PRR included the chart and commentary below: 

“The next chart shows the most likely Elliott Wave Theory labels. Wave 5 doesn’t have to be over yet, in fact a smaller wave 4 and 5 seems necessary to finish the bigger wave 5. Based on the log scale chart, there is resistance around 900. Will lightning strike twice and TSLA suffer two post-bowl collapses? My gut feeling says no, at least not initially, but perhaps after a brief violation of bowl support and subsequent rally continuation.”

The January 24 PRR followed up with this chart and commentary: 

“TSLA paused at 884 and started carving out another triangle, which could be a smaller wave 4 before the last spike into a quickly reversed all-time high (possible resistance in the high 900s, depending on timing).”

The updates TSLA chart shows a 31% drop from the January 25 high at 900.40, which was a bit lower then expected. Thus far, price has stayed above trend channel support. A break below 607 could lock in a 5-wave decline along with the corresponding implications (counter trend rally followed by eventual new lows), but as long as price stays above, TSLA can still recover.

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

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

Has the Great Unravel Started?

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on February 25. If you’d like to sign up for the free e-newsletter, you may do so here (we will never share your e-mail with anyone, just as we don’t accept advertising).

Last week’s Market Outlook showed a mature 5-wave S&P 500 rally with the implication that risk is rising. We’ve also been keeping track of the 2021 similarity with 2020. Below is an updated year-to-date 2021/2020 S&P 500 performance chart.

Of course I’m not naive enough to expect an exact repeat of 2021, but since investor sentiment is even more over-heated in 2021 than it was the same time last year, the down side risk is elevated and should not be ignored.

Up until late January, I was looking for more up side, but that has changed. I explained why in the February 14, 2021 Profit Radar Report:

“I spent hours analyzing the studies compiled and evaluated since February 1, and 11 of them project risk for the next month, only 2 favored reward. It’s a buying frenzy out there and rational analysis can be trumped by irrational behavior. A blow-off melt up before a return to normal jolts investors back into reality is possible. However, such a melt up is something an analyst allows for but doesn’t bet on.”

In addition to red hot enthusiasm a number of breadth studies even flashed a ‘too much of a good thing’ warning. Below are two of those studies published in the December 16, 2020 and January 17, 2021 Profit Radar Reports. Notice how forward returns of past precedents project weakness for Q1 2021 (red lines, bars).

Shorter-term, the DJIA is still close to the support/resistance trend line highlighted last week. If the Nasdaq-100 falls below 12,982 before rising above 13,476, the decline from the February 16 high will look like 5 waves and likely indicate a trend reversal. The short-term S&P 500 pattern is up to interpretation, but down side risk of the above studies looms over all major indexes.

If you are wondering what’s going on with 30-year Treasuries and TLT, you may find my analysis from the March 15, 2020 Profit Radar Report of interest:

“Distrust in government is a global mega trend, with various government bond markets (especially Europe and Japan) being mainly supported by governments buying their own bonds. The US Treasury market may just have carved out a key reversal and perhaps major market top (which of course maybe postponed by today’s announcement to essentially resurrect QE and buy $700 billion worth of assets). In the land of the blind, the one-eyed person is king. The US equity markets may be the global ‘one-eyed’ go-to option.”

Continued updates and the new 2021 S&P 500 Forecast are available via the Profit Radar Report. 

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

Stock Market Signals Are Piling Up

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on November 19. If you’d like to sign up for the free e-newsletter, you may do so here.

A ton has happened the last two weeks, but you wouldn’t know it by looking at the S&P 500 chart. The post-election/vaccine news pop (Nov 9) pushed price above the red resistance line for a couple hours, but that’s it.

Despite the continued S&P 500 (and Nasdaq) trading range, there’ve actually been a number of historically rare signals … elsewhere or under the hood. 

Signal 1: The percentage of S&P 500 stocks above their 200-day SMA has cycled from below 10% to above 80% (currently 88%, the highest reading since January 2020). Over the past 20 years, this has happened only 4 other times.

The chart below plots the S&P 500 against the percentage of S&P 500 stocks above their 200-day SMA. The 10% and 80% level are marked in red and green. The exact forward performance (graph and table) after the signal triggered was published in the November 15 Profit Radar Report. 

Signal 2: It took over 26 months, but the Russell 2000 finally exceeded its 2018 high. Over the past 35 years, the Russell 2000 set a new all-time high after a correction that lasted at least a year seven other times. 

The green boxes highlight similar recoveries. The November 18 Profit Radar Report published the exact forward performance (graph and table) when the Russell 2000 did the same thing in the past. 

Signal 3: On November 2, 3, 5, 9, 80% or more of NYSE volume went into advancing stocks. Over the past 50 years, up volume exceeded 80% on 4 of 6 trading days only 7 other times.

How did the S&P 500 do after similar ‘volume thrusts’? The November 15 Profit Radar Report showed the exact forward performance (graph and table) after the last 7 times this happened.

What’s the benefit of knowing the forward performance of past signals?

The Profit Radar Report shows the performance for the next 1, 2, 3, 6, 9 and 12 month along with odds of positive returns for each time frame. This allows investors to gage future risk and reward based on similar setups.

There is much noise, but when the market delivers 3 historically rare signals in a short period of time, it’s usually worth listening.

Continued updates along with the most likely long-term forward path for the S&P 500 (this was just published) are available via the Profit Radar Report. 

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”