S&P500 update: how bad is it? Or is it bad at all?

Since our last market update, which outlines our preferred wave count (see here) we noticed that market sentiment appears rather negative these days albeit the market refusing to break down and instead time and time again launches itself back into the 2075-2100 zone, like it did on Friday, where it has resided for most of this year. A market that refuses to break down will instead and often go up. But, what observable evidence do we have to support that notion? Let’s go back in time and move forward to see what evidence we can observe.

  • On October 7 a zweig breadth thrust (ZBT) event occurred. We reported on that here. Note, that there were actually 3 ZBT events since the SPX 667 price low made in 2009. The third one occurred October 2013. Each event led to double digit % gains before a correction >10% occurred. The char below shows the recent ZBT, and also exemplifies how rare it is, as most initital setups do not lead to a ZBT. Click chart to enlarge.

zbt

  • Two days later, the week ending October 9, a weekly A.I. buy signal occurred: green vertical line (all 3 lines of our proprietary indicator move up at the same time). Two weeks later, week ending October 23, a weekly MACD buy signal occurred; from below the 0 line. This is also why we developed the A.I.: it gives earlier signals then the MACD allowing for maximizing profits with minimal risk! In addition, the weekly SAR (a price AND momentum indicator flipped under price signalling a new uptrend). Click chart to enlarge.

macd 1

  • The significance of a weekly MACD buy crossover from below the 0 line is underscored by the fact that this has only happened twice during the bull that started March 2009: Once it happened (September 2010 and October 2011) the SPX added 22% and 17% before the next correction (>10%) occurred. Click chart to enlarge. However, there’s one more item that needs to be added to this equation and that is that in both cases the weekly MACD went above 0. This is key, as that signals a (continuation of the) bull market (in bear markets the weekly MACD remains below 0)

macd 2

  • Did the MACD line this time cross the 0 line? yes it did; on the week ending November 27. What else happened back then? We got a Coppock weekly buy signal: the Coppock curve moved from <0 to >0 at the same time. This also happened in September 2010, November 2011, August 2012, January 2013, and October 2014 (not shown). Each time the Coppock curve moved in those cases from <0 to >0, and the SPX gained 22%, 22%, 4%, 35%, and 4% before the next larger correction occurred. Click chart to enlarge

 

macd 3

  • In addition to these observable, intermediate- to longer term, bullish facts we also had a monthly A.I. buy signal for the past month of November. Since the price low made in March 2009, only 3 other monthly A.I. buy signals occurred, green vertical lines, and none failed. In fact, the first monthly A.I. buy happened on April 2009. The 2nd on September 2009, the 3rd on November 2011. All 3 signaled the start of new uptrends and considerable gains before a sell signal occurs: 24%, 32%, and 55% respectively. Click chart to enlarge.

monthly A.I. buy signal

  • Lastly, based on OEW the SPX generated a WROC buy signal on the week ending November 20, and a (less than ideal) weekly A.I. buy signal was generated the past week: dotted green line. We classify it as less than ideal, based on several parameters, one of which is the prior less than ideal sell signal and the prior strong buy signal. This 2nd current buy signal is more a confirmation and continuation of the 1st signal.

spx weekly

Hence, there are over half a dozen observable facts that are currently in favor of the bulls. Very few, if any are in favor of the bears. So one should question if it’s really all that bad, and as such we continue to focus on our upside targets as we already outlined over a month ago: see here.

As you notice, Intelligent Investing tracks many lines of evidence to determine the market’s next big move, Elliot Wave, S/R, TIs and TAs are several of them. Holistic objective analysis allows us to be on the right side of the market more often than not, without any preconceived notion or opinion. We use just the facts. Just like we did here! Do you want to be on the right side too? Of course! Then please join us here.

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