SHORT-TERM: MORE DOWN AHEAD
Strictly speaking, the Friday’s sell off only proves the rebound we had (have) is further weakened, because for the same level of rebound, a > a’, while for the same level of pullback, b’ > b, therefore accordingly, even it turns out to be the 3rd push up isn’t over yet, the market rallies huge starting from the next Monday, most likely the magnitude of C up is no match with that of A and B. So does this enough to prove that the Aug 9 lows will be revisited? All I can say are, the possibilities become higher. As mentioned in the Friday’s Trading Signals, there’re nothing 100% guaranteed, any signal can be confirmed and confirmed, so all I can do are to say the possibility is higher and higher and again and again, you must decide when to take actions when signals are confirmed to a certain risk level that you feel enough convinced. So, then, what’s our next confirmation? See horizontal blue line in the chart below, decisively breakdown would be 1-2-3 Trend Change, therefore the chances of revisiting the Aug 9 lows are higher because according to the Measured Move, which I’ll explain when indeed breakdown, the target is enough below the Aug 9 lows.
So, now the question is, whether it’s possible the blue line broken the next week? The answer is possibly. Three major reasons:
- 2 red days after a Major Accumulation Day, likely more down ahead.
- 76% chances an immediate lower low after a Major Distribution Day. By the way, I want to make it clear here: Please pay attention to my wordings. Lower low and lower close are two different things, as lower low can be realized intraday while lower close counts only the close. Similarly, higher high is different from higher close, therefore accordingly, when I mentioned higher high ahead in 09/07 Market Outlook, it was fulfilled on 09/08 because there’s a new high intraday even though the 09/08 closed in red eventually.
- The last but not the least, according to the statistics mentioned in 09/06 Market Outlook, with no exception the 09/06 lows will be broken.
INTERMEDIATE-TERM: SPX DOWNSIDE TARGET IS 1,000, THE CORRECTION COULD LAST 1 TO 2 MONTHS
For the intermediate-term, I’ll maintain my call for SPX target 1,000, see 08/19 Market Outlook for details. Meanwhile, I’d like your attention to 2 more charts today. One argues for some chances (I really mean some chances, it’s not my official call), the SPX 1,000 is just a tiny target in a big bear as the worst case would the year 2008 once more. The other chart argues, better not hope a huge rally sometimes soon to the all time high, although after 2 years brain wash, I, too, cannot help blindly believing that YES WE CAN and Helicopter are capable of anything, therefore I’m eagerly waiting for them to print more money to buy me a yacht and earlier retirement, and maybe a beach house or at least with a small pond, I mean enough for me to sail my yacht in it…
Let’s look at the chances of year 2008 once more first. I have no evidences to convince you that such a breakout from a long time consolidation area would go exactly as what happened in year 2008, but generally, the rebound should at least be 2 legged. We’re on the very 1st leg and the dashed green lines representing all the past cases when UUP weekly closed above %B top should give us enough hint what would happen thereafter.
Can SPX be at all time high soon? Take a look at the gas price you pay at gas station then tell me: Is it possible the market skyrockets high but the gas price doesn’t rise a penny? Impossible, isn’t it? And although we’re told that there’s no inflation (hey, my mother who does grocery won’t agree) yet, but the question is why TIP skyrockets high here? Is it possible that the market rallies huge while TIP, aka the inflation not rising? I’d be very interested to see how many people are willing to upgrade to iphone 5 when gas price is at $5 per gallon.
SEASONALITY: BULLISH FRIDAY
According Stock Trader’s Almanac, September Triple Witching, Dow up 6 straight and 7 of last 8.
See 09/02 Market Outlook for September seasonality.
SUMMARY OF SIGNALS FOR MY PUBLIC CHART LIST:
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