Friday, July 11, 2014

MTU Weekend Ed. - Topped? (7/11/14)

July's price actions to date allow for further weakness in stocks. As such, it is prudent to keep an eye on the possibility that stocks have "topped", for now.

It's possible to count a five-wave decline in stocks from their high on July 3rd to their low on July 10th.  If so, a potential trend change is at hand. The red counts in Chart 1 (SPX), Chart 2 (NDX) and Chart 3 (RUT) illustrate. The price structure of the DJ Transportation Average is an exception (Chart 4)

Stocks rolling over now (if that is the case) likely means the end of the upswing from their 2011 low, the second major upswing from the 2009 bottom. Whether we have a wave C or wave 3 top remains to be seen.

We highlighted three topping scenarios in Monthly Outlook Update (6/27/14) and Topping Scenarios (7/3/14). Chart 5 to Chart 8 update the two surviving scenarios.

We also track a bullish scenario in Chart 5 as follows.  The current pullback is wave b-down of (e)-up.  The pullback ended at the recent low.  Wave c-up of (e)-up should deliver a new high before topping.