S&P 500 Update

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The chart above is a weekly chart of the S&P 500. Some important trendlines are coming into play now. First the prior support from the bottom of the price channel last year is now just overhead. Very often old support once breached, like in the crash last fall, then becomes resistance. Also the contracting trendlines from March-July and Jan-June reached the apex last week. If the current pattern forming in the market is a type of triangle, then we should expect this upward move to be complete/completing.

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The chart is a daily chart of the S&P 500 to note some further details. Most of the notes are on the chart. For any new readers, an important concept in verifying a change in market direction is for a correction (or rally) against the current trend, to exceed the prior largest correction in % terms and in time. The most reliable way of recognizing a trendshift to the downside is for a larger and faster decline to take place in comparison to any decline in the prior advance. The notes on the chart build on this concept.

Since the move up from the Aug 17th low to the recent highs took 9 days (but most of it in 6 days), a complete retracement of that move in less time than it took to form, should be a good indication that the market will continue to correct for a while. In context of the possible patterns that are forming, if there is a swift decline below 980 this week, then I think it is very reasonable to view this major rally as complete.

The stage has arguably been set for a few months for a larger decline to begin, but price has kept pushing higher. So at this point, there is nothing to add to the recent videos and charts I posted. It is just a matter of price actually giving confirmation of a trend change as noted above.

From a big picture perspective, price action so far since the March lows is most comparable to the moves after prior bear market lows. So if the market makes new bear market lows, we will be witness to another never seen before market move, namely, the largest bear market rally ever in our markets. That is still my view. And as I've noted several times, I expect over the course of the next few years to see several instances of "never seen before" type of market action. I also will reiterate my prior view for long-term investments which is to move towards the "safest" possible cash type instruments (dollars, short-term treasury bills, possibly some gold). So everyone needs to due your own due diligence on the subject, but that is my view to take or leave. Bear markets come and go several times in a lifetime, but long-term debt manias are few a far between. And the debt manias typically take years to come down.