S&P 500 Update: Setting up for the big drop or one more twist and turn?!

This is a summary of this week’s premium members weekly market digest.

Let’s start with a recap:

Three weeks ago I forecasted for my premium members in my weekly market digests Ideal lows are in the S&P2670-2600, NASDAQ $7000-6800 and RUT $1460-2480 zones.”, and two week I determined that “Although the ideal c=a target for the S&P500 resides at SPX2587, there are now enough waves in place to count the downside complete, but one more stab lower can’t be ruled out entirely yet. An ending diagonal pattern is now developing, which when complete targets SPX2820 to the upside.

Two weeks ago, we got that “one more stab lower” to SPX2604, NAS6922, and RUT1461. That’s 0-2% variance between my forecast and actual price levels reached… Please pardon my inaccuracy… 😉

Last week we got SPX2815: once again please pardon my inaccuracy… 😉, while all indices reached their ideal b-wave target zones and retrace levels (e.g. 61.8% on the S&P, 76.4% for the DOW) in a three-wave fashion off their lows. Combined with the fact that b-waves (bounces) always consist of three waves (a, b, c) and this is a Bear market we should logically assume the larger b-wave bounce is over as all requirements have been met.

spx ew count 3

However, since the markets are always full of surprises, it could be that this week’s high was only wave-a of wave-b, and wave-b of b should then target SPX2705ish before wave-c of b moves price higher (dotted green and red arrows on chart). The preferred view is, however and based on the met requirements for a b-wave bounce, that SPX2705-2685 will only be wave-a of wave-c down to ultimately SPX2475ish. Regardless, we may see a little more upside first, but not necessarily, before the next leg down to SPX2705-2685. From there we can assess what the market’s most likely next move will be.

In the end, please remember we are currently dealing with a correction of a correction, which may already be over. But if it is not, this type of price action is the most difficult to forecast and trade. So, while I’ve clearly nailed each larger directional move over the last several weeks -that’s expert and accurate market forecasting right there- on a daily time-frame things can change rapidly and thus please be extra vigilant and use appropriate stops because this market is not kind to any position once under water.

Arnout, Ph.D.

2014-06-10 17.07.27-small

Founder and President Intelligent Investing, LLC

Vice President NorthPost Partners, LP

Leave a Reply