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Friday, June 19, 2009

SPX Bullish Percent Chart


Bullish sentiment on this chart has finally broken down and moved beneath the 50RSI mark. Its still above a typical "bounce" point. So this chart supports a further move down to more bearishness.

As my notes on the chart say, the SPX has fallen only 30-some points from its high (today's prices not the recent 903 low) yet this chart shows bearishness is getting lower. Yet prices are not too bad in the overall scheme of things. Just might be a nice clue that this setback is just an ABC correction that will turn back to bullishness soon enough.

EWI shows the Daily Sentiment Index (DSI) is back down from 86 to 68 so that has started to correct. No telling where that needs to go for a turn back up in a P2 wave.

Question is again, how much will price retrace? Well, sentiment on this chart went way down and price is still above the 50 and 200 DMA.

So its a matter of total volume (particularly to the downside) and support. So far everything seems in line for a bit more of a bearish pullback to get to that bearishness that allows a bullish turn. How much and how extreme? I'd guess the market finds its ultimate support at yet again at 875 or above. Its a logical guess. Why? Well the market is about ready to have a 50/200 crossover and I cannot see it getting too far out of hand to the downside if that's going to come in play for the rest of the move of P2 to final peak this summer which I think it will.

PS - I had favored a bullish extreme over the last few weeks to happen sooner rather than later and a move toward 1000 that never quite made it obviously. I can live with 956 being a P2 top, but I cannot say it is so at this point. Obviously more of a price retrace toward at least a 38% target 1014 would be more satisfying for P2. The market left us hanging and wondering, which of course, it likes to do just when we think we have it nailed down.

18 comments:

  1. This comment has been removed by the author.

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  2. Dan,

    Thanks for this analysis. Your reasoning seems sound, but I have a question. So far, I think we have had only two pullbacks in P2 of 5%. If what you say comes true, 875 would only be a 8.47% pullback, and 890 would only be a 6.9% pullback.

    Based on the history of P2s, and based on EWT, how do you understand this P2 that has had so few, and such shallow, pullbacks (so far)? Isn't this P2 acting unusually? If so, why?

    Is it due mostly to the powerful recoil from the huge drop to 667? Is it due mostly to the massive levels of market propping and manipulation by the banks and the government?

    And lastly, if we quickly hit 875 and quickly reach 1000-1050 to finish P2, wouldn't that make this one of the fastest P2's in history?

    Thanks for your thoughts.

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  3. SRS, those are some very good, deep questions that I don't have enough experience to answer.

    I suspect P2 has a short time window, relatively speaking, for a big retrace to P2 peak. Hence no huge corrections, just a lot of little ones (so far).

    P2 is acting normal. P1's great drop demanded a great rally (again, relatively speaking). Looking at Fibonnaci retraces, only the NASDAQ has reached 38% so far.

    I would suspect that the final zigzag to peak would take the same time as the first 2 zigzags relatively speaking. Through August maybe. As far as bear market P2's in history of this maginitude at a grand supercyle stage, I suspect there hasn't been a whole lot of them so I couldn't say.

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  4. Dan,

    Thanks for your quick and detailed reply.

    (By the way, I really respect your freely acknowledging the limits of your knowledge. It's so refreshing to experience someone with a sense of humility, rather than the arrogant and aggressive "characters". Good for you!)

    You don't need to reply to this, but I am trying to get a better sense of the depth and duration of P2's correction and then completion.

    You think P2 declines to maybe 875-890 and FINISHES maybe by late-August. For comparison sake, EWI thinks P2 declines to 875 (and maybe even 850 or lower!), and resumes RALLYING maybe by late-August. Presumably, EWI thinks P2 finishes by late 2009 or early 2010 -- significantly later than you think.

    Only if you feel like it, I'd like to know why you think EWI is wrong to anticipate a deeper correction and a much longer completion date for P2.

    Thanks Dan.

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  5. Dan,
    You earlier comments regarding the need for P2 to end is spot on. PE's are way out of line, look at what happended to rimm today. I also agree that there will not be a small pullback, all or nothing which will be known to us very soon. If EWI is correct and the market correction into the mid or lower 800's, then game over for P2 and we will be in the first leg down of P3. The calendar is also telling, should the s&p get near the 850 level prior to July 2nd, then P2 is over. The first part of July is usually down, if the market can buck this and remain in the 900's then P2 has a chance for a new high...doubt it. Keep up the good work, we really appreciate it.

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  6. Dan my man, SPX BP has been displayed on StockTock Social for two weeks. Visit some time...

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  7. Very good point Dan, if this were realy a massive down, there'll be no hesitation no second guess. It's a trick rebound up, buy at lower prices, eh?

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  8. Phil, I don't know if you are into CandleSticks, but the Weekly Pattern produced an Bearish "Evening Star".

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  9. Regarding Fibonacci, there are not only Fibo Price retracements but also Fibo Time retracements.

    As the grat First Leg down took 17 MONTHS, these are the Fibo Time retracements:

    23.6%: 4 months (almost acomplished).

    38.2%: 6 months (with this view P2 would last around the end of August.

    So, to sum up, even in the case that we are in a conutertend rally, which I think we are, maybe this rally is gonna take 6 months. 38.2% Time of the fisrt leg down sounds more reasonable.

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  10. Therefore, in September or end August we would see a steep decline in the stock markets. When P3 starts, it would be with a huge turn, not a sissy retracement, like the one we are experiencing.

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  11. If this ABC decline finish around 880 then why so many chart analysts said this is a correction and will last till late summer...

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  12. Re: TTO
    Be prepare for some 1000 point drop in Sept or end Aug.

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  13. TTO,

    "Sissy" retracement! LOL I like that!

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  14. TTO,

    Let me ask you what I asked Dan:

    EWI thinks P2 declines to 875 (and maybe even 850 or lower!), and resumes RALLYING maybe by late-August. Presumably, EWI thinks P2 finishes by late 2009 or early 2010 -- significantly later than you think.

    So TTO, given the above facts, what do you think about a P2 retracement of 50% (to about 1060) on the S&P that takes 8 or 9 months, with P3 starting in October or November (two months that are historically notorious for catastrophic declines)?

    Thanks for your thoughts.

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  15. BTW, count me in the camp that thinks P3 will start with a bang, not a whimper.

    Oh, the insiders may cause the first dip down -- but I expect that the first trickle will quickly be followed by a huge point drop on huge volume that rapidly builds into a terrifying waterfall.

    If P3 lazily meanders down during its first few days or weeks, I for one will be disappointed by the lousy lack of "drama". Ha!

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  16. so what potential downside do you see for tomorrow ?

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  18. Nice charts Dan, For some reason the number 777 keep getting in my chart.

    TD

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