Since my last post here, the market has decisively turned down on both the short and intermediate terms.  So in this post, I’m setting up the support ladders under the current price on both the daily bars (short term) and weekly bars (intermediate term) charts, and also showing the Arms Price Projection for this down trend.

The first chart here is the weekly bars chart.  We see that price has come down through S4 (not labeled), S3, and is in the process of breaking S2; this latest price bar is incomplete as I’m showing this as of yesterday.  The breakdown through S3 was the definitive event that establishes that we’re now in a new downtrend.  Below S2 is the ladder of support, defined by the labeled S curves, one of which is copied from the monthly bars chart.

The second chart here is the daily bars chart updated through yesterday, Tuesday May 15th.  The levels of the support ladder curves from the weekly bars chart are copied here.  As this downtrend unfolds, we should watch to see if there comes a turnaround in price at one of these ladder levels.

The red curve is the primary resistance curve, R1, for this downtrend.  So far, it’s still early in the trend and there has been now pull-up in price that may test R1.  If the first pull-up doesn’t come close to R1 before turning down again, then that will be the indication that this is an accelerated downtrend and at that point we can fit a BottomFinder to this downtrend – but not yet.

The lower blue bar identifies the consolidation top that preceded this new downtrend.  I’ve applied Arms’s Price Projection technique here, about which I blogged in detail a few months ago.  It defines the region into the cum vol future during which there will be significant downward pressure on price.  That pressure will end at the cum vol indicated by the horizontal position of the dotted blue vertical line.

For now, all we can do is sit back and watch this downtrend develop.

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In this post, I’ll review the short term (daily bars) and long term (monthly bars) charts.  In two weeks, I’ll review the weekly bars chart.

Long Term – Monthly Bars Chart

The first chart here is the monthly bars chart.  A month ago in this blog, I said, “The first chart here is the long term monthly bars chart.  We see that the uptrend is proceeding strongly, both looking at a small number of recent bars, and looking much longer term, since March of 2009.”  We now have April’s price bar on the chart, and it was mostly within March’s bar, closing near the top.  So, there really isn’t anything more to say here.

Short Term – Daily Bars Chart

The second chart here is the daily bars.  Compare this to the one in my post of two weeks ago.  Then, I said, “Whether this nascent 3-day old up move will become a new up trend depends on whether price breaks above New R1.”  Now we see that in the succeeding week after my last post, price came up near New R1 and turned down again, but did not break below support.  Instead, we got a sideways consolidation for a couple of weeks.  Then, on April 26th, price broke and closed above New R1, where it still is.  The upper blue line segment identifies the width of the consolidation, and I’m now applying Arms’s Price Projection technique about which I blogged here in detail several months ago.  Also, this technique is described in detail in our book.  Applying it here, the lower blue line segment projects to the cum vol in the future at which the upward thrust will end.  The consolidation provided “fuel” for the succeeding trend, which I’m projecting will run out at the dotted vertical blue line, after which we should expect different behavior.

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Intermediate Term – Weekly Bars Chart

The first chart here is the weekly bars chart.  In my post here of two weeks ago I said, “The TopFinder is chugging right along tracking this uptrend, which is now 78% complete.  . . . If you’re long, sit back and enjoy.”  At that time there was no sign of weakness in this up trend.  But now, the trend is getting a bit “long in the tooth” (so to speak), 87% complete.  It’s not uncommon, when a trend approaches 90% complete, to start to show some weakness, and here we see the latest bar coming down significantly in price.  But, it is still holding above S3, so the trend is still intact.  Once a trend gets above 90% complete, we often see an increase in volatility before reaching the end, so don’t be surprised to see that develop here.

Short Term – Daily Bars Chart

In my last post here, I remarked that some weakness was showing up, saying “ In this current scenario, a pullback to or below New S1 would be fully consistent with what we’re seeing now.  . . . a big pullback should not be a surprise.”  And indeed, we now see that a big pullback has happened, well below New S1, down almost to S2 Cal.  The little green horizontal line segment below the bottom of this pullback marks the level of S3 on the weekly bars chart, so it appears that, at least for now, price has supported there and started back up again.  Whether this nascent 3-day old up move will become a new up trend depends on whether price breaks above New R1.  If it does not, then there’s no new up trend, and movement down from New R1 would indicate most likely a new down trend.

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Long Term – Monthly Bars Chart

The first chart here is the long term monthly bars chart.  We see that the uptrend is proceeding strongly, both looking at a small number of recent bars, and looking much longer term, since March of 2009.  There really isn’t much more to say about this chart, other than if one is long, enjoy the ride!

Intermediate Term – Weekly Bars Chart

The second chart here is the weekly bars chart.  The TopFinder is chugging right along tracking this uptrend, which is now 78% complete.  As with the long term chart, we can say, it you’re long, sit back and enjoy.

Short Term – Daily Bars Chart

The third chart here is the daily bars chart.  Although it’s still proceeding upwards, over these last two weeks it’s looking like the upthrust is loosing some steam.  The recent two pullbacks are not too far above the new S1, so this uptrend is not strongly accelerated.  Over the last month and a half, the Money Flow Index (top pane) is showing negative divergence with price, indicating some weakness starting to come in behind the scenes.  In this current scenario, a pullback to or below New S1 would be fully consistent with what we’re seeing now.  This is not a prediction of such, but just an observation that some weakness is coming in, so that a big pullback should not be a surprise.

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Short Term – Daily Bars Chart

The first chart there is the daily bars chart.  We see that the price consolidation started two price bars before the TopFinder (TF) ended.  The price decline started when price broke below the TF curve on March 5th.  The day before, the TF was 95.5% complete.  I always advise users of the TF that when cum vol gets to more than 90% completion of the TF, price often becomes more volatile.  The TF rarely ends exactly where the consolidation starts.  In this case, the uptrend ended when the TF was more than 95% complete, which is a very good performance for a TF.

On the day that the TF actually ended, the price decline that had started two days earlier came to a screeching halt right at S3, and the next day it reversed and started a new uptrend, which continues robustly to the present.  I’ve launched a new S1 curve from the beginning of this uptrend.

Intermediate Term – Weekly Bars Chart

The second chart here is the weekly bars chart, which I last reviewed here two posts ago, on Feb. 17th, q.v.  Then, the strong uptrend was right about at the 2007 high, but I observed, “This uptrend is very strong and showing no signs yet of pausing.”  Indeed, we see here that price has blasted right through the 2007 high and has closed far above it.

The sharp down spite of two weeks ago, a doji candle, supported just above S3, from which price has sprung strongly up. That brief, one-candle pullback amidst this accelerated uptrend gives us a place to which to fit a TopFinder. Doing so, I see that it also nicely fits the first pullback last December, so that gives us confidence in this TF.  Currenty, this TF is about 70% complete, with projected completion at the horizontal location of the dashed purple vertical line.

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Long Term – Monthly Bars Chart

The first chart here is of the long term, the monthly bars chart.  We see that price poked significantly above the 76.4% Fibonacci level, and closed still above it.  This bodes well for a continuation of this long term uptrend.  Above where we are now, the next resistance is a relatively minor one, the gray line marking the 2008 high at 1440.  After that, there’s no clear resistance before getting to the 2007 high of 1527.

Short Term – Daily Bars Chart

The second chart here is of the short term, the daily bars chart.  (I’m not going to review the weekly bars chart this time since we are mid-week.  I’ll do that one after the Friday close of March 16.)  See my last post for an in depth discussion of the TopFinder on this chart.  We see now that the TopFinder is about 92% complete, nearing its projected end at the dashed vertical line.  Last time I said,

“The blue trendline is an extrapolation of the linear regression fit to this trend, and at the projected end of the TopFinder, its level is 1400.  This is NOT a prediction that price will go to 1400 at the TopFinder’s end, since price usually starts to roll off considerably as it approaches the end.”

And indeed we see that price action is now sagging below the extrapolated trend line.  Last time I also said,

“Once the current short consolidation of the past week ends and price moves up again, I’ll launch S4 from the low of this consolidation.  Typically, an accelerated uptrend spawns S curves thru S4 before it ends.”

And as you see now, I have launched S4.  The four-fold hierarchy of S curves is now complete, and we anticipate the end of this trend in a week or so.  After that, we expect at least a brief consolidation before the market decides what to do next.

This TopFinder was fitted to the price at the lowest arrow labeled “Fit”.  But notice that the curve is close to fitting nicely also at the other two arrows, Feb. 16 and 27; one is a little over and the other a little under.  This gives us more confidence in this TopFinder.

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Intermediate Term – Weekly Bars Chart

The first chart here is the weekly bars chart.  In my last review of this chart on Jan. 15th, I noted that price was in the midst of a cluster of resistances, and “. . . price needs to break out above this cluster of resistance and close above Monthly R1 before we can be sure that an uptrend is still in progress.”  Well, we can see now that price certainly did make that break-out!  Price has shot up in a very steep straight line since the latter part of December.  In the next chart here, the daily bars, I’ll examine this uptrend in detail.

We see that price now is very close to the 2011 high and to the 76.4% Fibonacci retracement line from the monthly bars chart (see my last post).  Last evening on the Nightly Business Report TV show on PBS, I heard a technical analyst pontificate about how reaching the 2011 high will cause price to consolidate here for a few months.  He was quite certain about this.  I’m not so certain.  This uptrend is very strong and showing no signs yet of pausing.  Also, look at the upper pane of this chart, the so-called Money Flow Index, which is really the volume weighted RSI.  It usually rolls over from an overbought condition many weeks before price slows down, and right now that index has just attained overbought status, nowhere near showing a negative divergence as it did at the 2011 top.  So, most likely, I think this trend still has legs.

Short Term – Daily Bars Chart

The second chart here is the daily bars chart, where I dissect this powerful uptrend we’re in now.  First, go back and look this chart as shown in my last post here, Feb. 1st.  There I showed that a TopFinder that was fit to the minor pullback in mid January had just about ended.  Consolidation was to be expected, and indeed a consolidation was already in progress.  The updated chart here shows that the hammer candle on Jan. 30th nailed the low of that consolidation, from which price continued robustly upward.

I have fit a new TopFinder to that Jan. 30th low (marked “Fit”).  It has a “Duration” of 20 million shares of cumulative volume, and is currently about 77% complete.  The projected horizontal location of the end of this TopFinder is shown by the dashed vertical line.  The blue trendline is an extrapolation of the linear regression fit to this trend, and at the projected end of the TopFinder, its level is 1400.  This is NOT a prediction that price will go to 1400 at the TopFinder’s end, since price usually starts to roll off considerably as it approaches the end.  You may think of 1400 as an upper limit to what the price will be at the end.

This chart is really a textbook example of a TopFinder in action.  The uptrend is accelerated since price is moving along far above S1, so the application of a TopFinder is very appropriate.  Also, notice that I’ve put in the hierarchy of support curves as it now exists – S1, S2(calibrated) and S3.  Once the current short consolidation of the past week ends and price moves up again, I’ll launch S4 from the low of this consolidation.  Typically, an accelerated uptrend spawns S curves thru S4 before it ends.  So, this uptrend is percolating along in classic fashion.

I don’t do predictions.  What’s presented here is not a prediction that this uptrend will continue to the projected end of the TopFinder.  Rather, what I’m showing is that current price action is consistent with that of an uptrend that is 77% complete.  Past experience shows that the projection has a higher probability of completing than not.  But of course nothing in the market is certain, so no predictions can be made.

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Long Term – Monthly Bars Chart

The first chart here is the monthly bars chart.  In my last review of this timeframe chart, two months ago, I said, “So, on this timeframe, the volatility of the market is contained in this very wide trading range between S2 Cal. and R2.  Nothing more can be said in this timeframe until price eventually breaks out of this range.”  Now we see that price has broken out above both R2 and R1.  This bodes well for continued upward movement, going on to challenge the 2011 high.  Looking at this chart more broadly, from the 2009 low we see that in 2011 we established both a higher high and a higher low, confirming that since March of 2009, price has been, and continues to be, in a long term uptrend.  If price goes on to break above the 2011 high, this will continue the uptrend.

Short Term – Daily Bars Chart

The second chart here is the daily bars chart, updated through yesterday.  There is a TopFinder (purple curve) running from the December 19th low, and it is essentially done now.  So, this accelerated sort term uptrend is over now, and we should expect at least some consolidation before price decides what new direction to go in.

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The chart here is the intermediate term weekly bars chart.  In my mid December post (QV), I said that an overal uptrend was emerging from the fog, mainly because the chart was showing a higher high and a higher low.  Now we see that the market has come right up to the previous high, amidst a cluster of resistances.  So far, it has closed above “Left R1″ and Monthly R2.  It poked above the horizontal resistance marking the previous high, but retreated to close below it.  Not far above is Monthly R1.  So, I would say that price needs to break out above this cluster of resistance and close above Monthly R1 before we can be sure that an uptrend is still in progress.

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The Year

One word describes how the S&P 500 ended – Flat.  It opened the year at 1257.62 and closed at 1257.60.  That’s quite a statistical oddity!  At the high of the year it was up 9% and at the low, down 15%, but ended flat.

Very Long Term – the quarterly bars chart

The chart here is the quarterly bars chart from the early 1980s.  Let’s talk through the major moves shown here.

•  The giant accelerated very long term uptrend powered by the baby boomers launched in mid 1982 and finally topped out in the first quarter of 2000.  The green support curve starts at the beginning of this uptrend, as does the TopFinder, TF1, which is fit to the 1998 pullback.  That uptrend was a 1,420% gain.

•  The tech bubble burst in 2000, resulting in a -50% hit, down to the end of 2002.

•  The recovery ran from the end of 2002 to the end of 2007, resulting in a 105% gain, topping out just about where it was at the tech boom peak in 2000.  The TopFinder TF2 tracked this accelerated uptrend perfectly.

•  The crash of the Great Recession took the market down 58%.  But in March of 2009 that crash came to a screeching halt and turned around exactly at the green support curve, one of those amazing performances by a Midas support curve.

•  The accelerated uptrend that started in March 2009 looked like it was going to be a repeat of the one that ran from 2002 to 2007, so I fit a TopFinder, TF3, to the pullback of Sept. 2010, as well as starting the S2 of that uptrend, the second thin green curve, from the same date.  However, the latest two price bars of this chart have clearly broken below S2, showing that this accelerated uptrend has ended.

Where do we go from here?  The only firm conclusion we can make is that we’re not having a strong uptrend up to the 2000 high.  It is possible that after this pullback of the last two quarters an uptrend could start.  But clearly, we’re in a different mode now from the two big cycles that started in 2000.

Looking at this chart from the mid 1990s to the present, we see that in March 2009 we had a lower low, and in June 2011 a lower high;  these two facts are an indication that the long term trend has turned down.

Overall, though, the most remarkable feature of this chart since the 1990s is the cycling – absolutely enormous price moves up and down, -50% and +100%, several times.  We’re in a huge trading range defined at the top by the peak in 2000 and at the bottom by the S curve launched from mid 1982.

Since price is cycling, oscillators are appropriate to employ.  My two favorite are the RSI (top pane) and the MACD (bottom pane).  Quite remarkably, both are showing strong negative divergences as indicated by the downward slopes of those two red lines.  These are implying future downward price movement, consistent with the fact that we’ve experienced a lower low and a lower high.

My conclusion:  We’ve been in a huge cycling range for the last 12 years.  The current indications are somewhat negative for the breakout from this range.  If that does happen, it would be dire indeed for both the market and the economy as a whole, since that would put the S&P below 700.  I think that, even before we got that low, the Federal Reserve would step in with a new round of quantitative easing, QE3, which would reverse the market’s decline and set us off on a major new uptrend.

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