March 9, 2016 - 11:18 AM EST
Print Email Article Font Down Font Up
Market Highs are in the Rear View Mirror...

Bear Market Rally Underway


It remains my premise that we are looking at the highs for the broad-market indices in the rear view mirror. Throughout the November 2014 – July 2015 time frame, all five components among the Big Five (Dow Jones Industrials, Dow Jones Transports, S&P 500, New York Composite, and NASDAQ Composite) etched-out their bull market peaks. Since the final highs in July of 2015, the bear market has begun the stair-step process of heading lower. The sharp break we saw in August/September of last year and again in January/February of this year would certainly validate that assertion. However, no bear market goes straight down without a few counter-trend rallies along the way. Indeed, bear market rallies – another of which we are now experiencing – are characterized typically by low volume and high volatility – and that is exactly what we are now witnessing.

The 15,625 price level for the Dow Jones Industrials is supplying a temporary shelf of support. On the chart of the Dow I have drawn horizontal lines at increments of 625 points. Notice the effects of support and resistance. The 15,625 line is 625 points above the all-important 15,000 level – a major price octave – which explains the active significance of the 15,625 level. But I expect the 15,625 floor of support for the Dow to be rather short-lived. Indeed, once this bear market rallies runs out of rocket fuel – which appears likely near mid-month – the Dow Industrials and the rest of the market are likely to resume their southbound retreat. Looking out over the next several months, the May 10, 2016 time frame continues to figure prominently as the point for investors to look for the next meaningful – and tradable – low in this bear market.

It Began With the Dow Transports and Ended With the NASDAQ Composite

In studying a number of prior bull market topping evolutions, I have noted that the Dow Jones Transports tend to be either the first or the last component among the Big Five to top-out. In the 2000-2001 topping evolution, the Transports were the last component to peak-out in May 2001.

The 2015 topping evolution began with the Transports high on November 28, 2014 and ended with the NASDAQ Composite high on July 20, 2015 – an eight month swathe of time. The March 2000, October 2007, and July 2015 highs were evenly spaced at eight years – 1,921 and 1,941 TDs respectively. We can also see that 5,000 – a major price octave – has served as major, long-term resistance. 5,000 for the NASDAQ could well serve as a major glass ceiling for this index for quite some time. 3,750 marks the next major price octave below the 5,000 threshold and would be a likely area to look for support at the projected May 2016 market lows.

16-Mar-2016 FOMC High?

On page three I note a 20.42 trading day (TD) rhythm – and its 33.0 TD 1.618 companion – as important time counts in the low-to-low sequence for the SPXS inverse ETF. These low points equate to high points in the S&P 500. I also note the confluence of a couple Fibonacci ratios clustering in the March 18th time frame as well.

Furthermore, we also have a Spring Equinox on March 20th as well. In summary, the technical picture points strongly to the March 18th time period (+/- 2 TDs) for the next high-point reversal in stocks.

But there is one more cyclical function to consider. At left is a 60 minute chart of the S&P 500. With pink vertical lines I have highlighted a turning point rhythm that has averaged 54.3 hours between turns. The operable function is probably 55 hours – a Fibonacci number. The measured standard deviation is 2.15 hours. The regression analysis points to the March 16th time period at about 10:30am Pacific time for the next occurrence – coincident with the release of the next policy announcement from the Federal Open Market Committee (FOMC). Hmmm…

World Indices

As with the American markets, the European Big Three – the German DAX, United Kingdom FTSE-100, and French CAC-40 – have since rebounded in concert with their American counterparts – but not forming a pair of bottoms in January and February like the American indices. Other than the Toronto TSX index, all of the European indices broke to substantially lower lows in February.

In addition they are all trading well below their respective 200 day moving averages. The Italian MIB index has fared the poorest in terms of relative strength among the major European indices. The weakness in Europe is indicative to me that this “countertrend” bear market rally – as I am calling it – is on borrowed time. The US markets are likely to play “catch-up” with the European indices in the next wave down.

Crude Oil

Crude oil prices have fallen back down to levels not seen since 2009. Price found recent support just below $30 spot at the February 11th lows. My analysis of the price data depicted on the chart above depicts an intermediate term trough-to-trough cycle averaging about 196 trading days – roughly 40 weeks.

Predictably, we are now heading higher – although this move back up is part-and-parcel of a major bear campaign that has considerably further to run. Through extensive regression analysis, I have identified the November 2018 time period as the likely point at which to expect a major bottom in oil prices.

image

Precious Metals

Comex gold has staged a fairly robust rally with price now once again above the all important 1,250 level – a major price octave – and a probable area to look for major resistance to much further advance. The vertical lines on the chart denote what I refer to as gold’s “primary cycle” which, over time, tends to oscillate about the 89 TD period. 89 is, of course, a primary Fibonacci number. The next primary cycle low is due in early April. As such, a primary cycle high is due right about now.

The more-volatile XAU – now just below 70 – is also right at the point at which we could see resistance to much further advance. I note the 200 day moving average is still declining. This important indicator of trend is likely to serve as a probable support threshold at the next primary cycle low.

Each month, Stan Harley publishes The Harley Market Letter, a newsletter that provides advanced technical analysis of stocks, bonds, and precious metals. This is the abridged Harley Market Letter for March. Want to learn more from acclaimed market analyst Stan Harley? Visit his site and subscribe to the full Harley Market Letter.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Source: Equities.com News (March 9, 2016 - 11:18 AM EST)

News by QuoteMedia
www.quotemedia.com

Legal Notice