The current up leg runs back to late 2012. A tight, powerful up channel broke down in Jun.
2013 after the QE taper concept was first introduced by the Fed. Since, the market has
experienced a somewhat milder and more volatile up channel. There were downward breaks
in Oct.'13 and again in early Feb. Both were quickly repaired and the rally continued. There
was another break today. The market has also held up very well against its 100 day m/a. But,
it broke below the "100" again today. The SPX is modestly oversold in a short term down-
trend. SPX Daily Chart
The SPX has been through several breaks like the current one only to bounce back from
the rough area of trend support and I regard the current situation as critical but not serious
as of yet. Obviously, to avoid another whipsaw to the upside, we need to see further and
extended technical damage over the next week or so . I would also point out that the more
deeply oversold NASDAQ Comp. closed out today right out on its rising trend line of 4000.
These declines in index prices to support levels will not be lost on seasoned traders who will
watch the tests just ahead with great interest.
The beginning of this third up wave in the current cyclical bull market began in the Fall of
2011. This longer term trend was last tested toward the end of 2012. As of now, the SPX
at 1816 must hold above the 1760 - 1775 area to see the current wave stay intact. The major
focus as we swing into next week will be on whether the market will whipsaw again, but
since the longer run trend has not been tested for over a year, you may want to keep the
lower, longer term support levels in mind as well.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!