Thursday, February 14, 2013

SPX Update: Time to Stay Alert for a Correction

Yesterday's update noted that the S&P 500 (SPX) was in a somewhat ambiguous position, and that remains the case today.  The waveform has gotten a bit sloppy over the past few sessions -- nevertheless, an added degree of caution is called for, since the wave reached perfectly January's target zone, and the waveform can be counted as complete at blue degree.  If my preferred wave count is correct, the current rally should be nearing a correction -- but it must be noted that there is as yet still no solid indication of a turn.  I've annotated a 10 minute chart of the SPX which should help provide clues. 

The first important zone is now 1514 +/-, and sustained trade beneath that support zone may provide the catalyst for a deeper correction.  Yesterday's decline appeared impulsive (to me, anyway), but left just enough doubt to keep more bullish near-term options on the table (black count).  If my preferred interpretation of the decline as an impulse is correct, there should be some downside follow-through over the next few sessions.

The hourly chart is materially unchanged over the past several weeks, and if the preferred count is correct, then the blue wave 4 corretion is underway (or will be after one more small wave up).  While I'm inclined to view yesterday's decline as an impulse wave, which suggests downside follow-through, there are presently no solid targets with the market in this position.

In conclusion, the wave has now reached dead-center into the target zone, and has registered momentum divergences while doing so.  When targets are reached, it's always time for added caution, and indeed blue wave 3 can be counted as complete (or nearly so).  It's time to start watching for further signs of a correction.  Trade safe.  

Reprinted by permission; Copyright 2013 Minyanville Media, Inc.


  1. Perhaps the latest reports of the Q4 contraction in the Eurozone will be cause for a pause in the markets . The eurozone recession deepened in Q4 as GDP shrank a greater-than-expected 0.6%
    . Please see this Bloomberg article
    I once read the the market performs best when the economic climate is at it's worst. Think that there is any truth to that?

  2. If the economic climate is declining and the Fed is attempting to spur it forward by printing, then you bet, the market will perform well.  Back in the day when they had room to ease rates, that would do the trick instead of printing.  But they have little to no more room left to ease rates but they're certainly in print mode.

  3. this is the worst economic recovery out of a recession in American history . the divergence between abysmally low real GDP growth and outsized asset appreciation cannot long endure. at some point, if the real economy cannot continue to cash flow asset market inflows the ROIs on long positions will not outpace opportunity costs (such as margin) and eventually inflows will not match liquidations.  all inflations must end in deflation, all rallies must end in correction.

    charts source

  4. Hi, Jason,
    Sorry to post here, but I think it gets your attention, please check out the crude oil chart as I believe a big move is on the way.