Friday, December 19, 2014

MTU Weekend Ed. - Santa Rally (12/19/14)

... draft in progress, subject to change ...


Stocks followed the typical December seasonality (Seasonality(12/12/14)) and staged a Santa Rally, netting 4.97% for the SP-500 index and 4.73% for the Dow when measured from the December lows to Friday's high. Moreover, the small-cap Russell 2000 index achieved a higher high, hinting that other indexes are likely to follow and deliver new record highs. See Chart 1 and Chart 2.








If the market follows the historical pattern into the next week, the week of the 4th Friday in December is even more bullish as discussed last week. See Chart 3 and Chart 4.



We track the current rebound (tentatively) as wave (c)-up of [e]-up of the proposed expanding diagonal triangle in SP500. Under this interpretation, the December low is wave (b)-down of wave [e]-up (Chart 5). An alternative scenario is that wave (b)-down is not complete, a wave c-down of wave (b)-down to retest the December low should do the job.

The latter scenario would "buy" the market some time to finished the large expanding EDT in the March/April time frame discussed before. In both scenarios, current upside target remains at a marginal high above 2102.



Chart 6 and Chart 7 present the two scenarios at lower time frames. The blue count tracks the immediately bullish scenario and the green count tracks a potential retest of the December low.



Market Timing Update (12/19/14)

[740 am] ES update -
ES makes a new record high overnight, as hinted by RUT yesterday. See chart for tracking counts from the low.


Thursday, December 18, 2014

Market Timing Update (12/18/14)

[EOD] Stocks -
SP500 closed solidly above the neckline. Price actions in RUT suggests new highs in SP500 is likely in sight. See charts.

[1130am] SPX/RUT update -
Is RUT gunning for a new high (and the rest of the pack as well)? (Chart 1) Is SP500 retesting the red neckline? (Chart 2) Tracking the rebound (Chart 3).




[730am] ES update -
A solid gap above the Sep high in ES (Chart 1 and Chart 2) and the neckline in SPX cash - this type of overnight resistance gap has happened many times before. The overnight rise likely counts as the green wave 3 (or C) as highlighted yesterday. See Chart 3.


Wednesday, December 17, 2014

Market Timing Update (12/17/14)

[EOD] Stocks -
SP500 stalled at the red neckline (Chart 1), which is likely important. Squiggle tracking counts from the nominal low range from very bullish (green 1-2-[i]), to quite bullish (blue five up), to bearish (red [a]-[b]-[c]). See Chart 2. Chart 3 presents how today's rebound might fit into the larger picture. Meanwhile, 10Y yields bounced off the base channel line (Chart 4). See Monthly Outlook Update (11/28/14) for more.

[225pm] SPX update -
Watch the red neckline. See charts.

[805am] ES update -


Tuesday, December 16, 2014

Market Timing Update (12/16/14)

[EOD] Stocks-

[130pm] SPX update-
ES is retesting its overnight low. It may or may not result in a lower low in SPX to wrap up a potential five wave decline. See charts.

[1005am] SPX update-
NDX and TRAN are testing their Sep highs, with the rest of the benchmark indexes already below those levels. See charts for tracking counts on SPX.


[720am] ES update-
diagonal triangle decline - triple three, EDT, LDT. See charts.


Monday, December 15, 2014

Market Timing Update (12/15/14)

[EOD] Stocks-
Tracking a potential expanding EDT.











Tracking various benchmark indexes





















SP500 at Fib-382 retrace










[1155am] SPX update-
SPX-cash filled the middle gap, is now at HS target and Fib-382
retrace.
[805am] ES update-
See charts for tracking counts, and Seasonality (12/12/14) for discussions.



Friday, December 12, 2014

MTU Weekend Ed. - Seasonality (12/12/14 close)

The correction towards the October low in stocks finally materialized this past week, sending SP500 down 77 points from its all-time-high to its Friday low of 2002.33 and into its 50-day moving average currently at 2000.73, effectively filling two of the three major upward gaps. See Chart 1.

If the remaining upward gap around 1905/1909 survives the current sell-off, odds favor the pullback being wave (b)-down of wave [e]-up of the proposed larger degree expanding EDT dating back to October 2013. See Chart 2 and Price and Time (12/5/14) for details and bearish alternatives.



In that case, stocks are likely to resume their wave [e]-up rally, perhaps as early as next week. Consider the following.

SP500 is now approaching its initial support cluster. As of Friday, primary support off the October low is at 2009. The 50-day SMA sits at 2001. The Fib-382 retrace of the prior advance is at 1981. The head-and-shoulders pattern highlighted in Chart 1 projects to the mid-1980s.  Furthermore, the magnitude of the current pullback is now comparable to (b)-wave pullbacks for the proposed expanding EDT (Chart 2, green line).

Note that SP500 futures reached 1996.5 cash equivalent in the after-hours trading on Friday, effectively filling the middle day-bar gap.

The pullback took the form of a three-wave corrective decline so far (Chart 1). It’s also possible that the pullback is wave E of a bullish expanding triangle (Chart 3).


So far, market breadth appears to be more resilient than benchmark indexes. For example, while SP500 has already dipped below its September high, its cumulative advance-decline line has not only failed to do so but also shown a much shallower pullback. See Chart 4.

Stock market seasonality is consistent with the sell-off this past week and would be consistent with a potential rally over the next few weeks.

Interestingly, the pullback this past week took place in a time-period when the market has been relatively weak historically, netting a median return for the Dow of 0.12% since 1915 and 0.02% since 1963.

The following two weeks, however, has been relatively supportive of stocks. For example, the median return of the Dow during the week of the third Friday in December is 0.39% since 1915 and 0.43% since 1963 and 60-70% of the time the market has experienced a up week. The historical performance during the week of the fourth Friday is even better. See Chart 5 and Chart 6.

Let's see if a Santa rally shows up.