Does The Market Have Only Two Options Now?

In early July, when the NASDAQ was at around $4800, we already forecasted it would target $5300-$5400. And we have remained that target since. See for example our posts on here and here. Over the past three weeks the NAZ hit the low-$5340s twice. Not too shabby of a intermediate term forecast dare we say. That’s what objective, factual, technical analyses can do for you: a headache-free 10+% gain in 3 months. Please click here for  2-month trial period. Looking ahead, we now see the NASDAQ hold support at $5100 before the next leg up to $5800 starts.

Shorter term, and focusing on the S&P500 we see the market as having the following two most likely options, see Figure 1 below.:

  • Red arrows: intermediate ii still unfolding. We’d get one more abc up to close the gap at SPX2163, with b dropping to SPX2128 and c=a=35 relationship to SPX2163. This will then be followed by one lower low to SPX2105. At SPX2105 when then also have a larger c=a=75 relationship.
  • Blue arrows: intermediate ii completed and minor 1 of intermediate ii is underway targeting around SPX2185-2195.

Figure 1.  SPX hourly chart with two most likely price-action options going forward.


To be honest, we’d prefer the first count. Why? The market then whipsaws the greatest majority of market participants to the point they give up, no matter which side of the market they believe in. And, this is what is happening with investors’ sentiment:

AAII Sentiment’s survey shows bullish sentiment fell to 25.5%, putting it below its historical average of 38.5% for the 49th consecutive week and the 82nd out of the past 84 weeks. Neutral sentiment pulled back to 40.8% and remains above its historical average of 31.0% for the 37th consecutive week.  Bearish sentiment rose to 33.7% putting it above its historical average of 30.5% for the fifth time in seven weeks. Pessimism has largely stayed above its historical average since the end of August. Though higher than the levels seen in July and most of August, pessimism has stayed within its typical historical range. Optimism is currently at an unusually low level, and has been for four out of the past five weeks. Simple put: only 1 out of 4 investors think the market will go higher over the next 6 months… Contrarian?

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