Saturday, December 21, 2013

MTU Weekend Ed. - Post Tapering Anncouncement Rally (12/20/13 close)

SP500 surged to another record high of 1823.75 after the Fed announced its decision to taper its asset purchases. The rally likely validates the wave-5-rally-to-new-highs tracking count discussed in Neckline and More (12/13/13).

While the post-tapering-announcement rally has been swift and sizable relative to its time frame (Chart 1), the overall price actions appear to suggest (at least) the advance since the June 2013 low is topping (Chart 2).

As Chart 2 indicates, the rally this past week counts well as a fifth wave or a final [C] wave of a double zigzag since the June low.

Also, advance/decline profile of SP500 is negatively diverging from SP500 index itself at the moment (Chart 3). Weak internals would be consistent with a terminal move. The caveat is that the rally could be in its early stages as illustrated by the black count in Chart 1, and SPX internals would catch up with the index before long.

Furthermore, SP500 continue to crawl along its resistance line on the monthly chart despite incremental record highs this year (Chart 4). At the moment, there's no evidence yet of a (wave 3) breakout. As we mentioned before, this resistance line is "responsible" for the 2010, 2011 and 2013 corrections.

See Chart 5 (updated) and Neckline and More (12/13/13) for discussions of larger degree tracking counts with respect to the 2009 low.