Market Turns Daily Outlook for 8/2/06
S&P 500 CASH Index
From previous outlook: 'As per the notes from last night, the 10 day cycle is now extended side of it’s normal topping range within it's current pattern. With basically all of these coming on or before 10 trading days, we either saw a short-term top with this component in Friday’s trading or it should not be too far away (with time). Once it is complete, then the probabilities will favor a retrace back to the 9 day moving average or lower, with noted support from last night actually at or near the 1259-1262 region. Stepping back slightly, if the 10 day cycle does see it's normal dip off the top in the coming days - and if it does so before the 1291 level is hit on the SPX - then a higher high should once again be seen on the next 10 day up phase.'
Current analysis: Tuesday's session was spent in corrective mode, with the index opening gap down with the September futures and then seeing the cash index trading all the way down to an intraday low of 1265.71. Volume came in at 1.65 billion shares, which is a 5% expansion from Monday's levels and gives better than average odds that today's low will be tested again or exceeded at some point.
As per the notes from recent days, the nominal 10 day cycle component was statistically due for it's normal correction off the top. So far the highest high seen here was Friday's 1280.42 swing top, which looks like it was the peak for this component. The expectation was that, once complete, this 10 day cycle would see a retrace back to the 9 day moving average/weekly projected support area, of which today’s decline nearly came close to satisfying. And, with the notes on volume from above, it looks like this could be setting up for Wednesday's session.
From last night: 'The 45 day cycle is suggesting an upside target to the 1291-1300 region, while the statistical notes on the 120 day cycle has also been suggesting a test of the 1290 level or higher is going to be seen. In other words, a correction into the 10 day low looks likely to be followed by a try at higher highs on the following swing up, which, in turn, should then give way to yet another top with the larger 20 day cycle.'
Current analysis: If the 45 day target and the statistical notes with the 120 day cycle are going to prove to be correct, then once the current 10 day down phase is complete then another run to new swing highs should be seen on the next 10 day up phase. However, that is likely to be stymied (in terms of time) as the larger 20 day cycle is now starting to go over it's own top. However, to keep the current 20 day channel pointing higher, you can see on the chart above (chart 1) that we basically have to hold above the 1259-1260 level (approximate) on any 10 day down phase here - which is right at or near outlined weekly projected support. In other words, as long as we hold above the 1259 level on a closing basis I have to think the current 10 day down phase is going to be followed by a higher high above 1280.42. Again, should that be seen, then at that time we will want to start entertaining the idea of a larger 45 and 120 day top forming, though for now it would take a turn down in the 45 day oscillator - along with a break below support (as yet to be determined) to signal a larger peak in place. More as we move forward.
NASDAQ 100 CASH
From previous outlook: Volume was also very light on this index, coming in at just 1.56 billion shares here as well; coming on a day where a higher high was made this is still seen as more short-term bearish than bullish. From the notes from last night, the odds leaned in favor of a higher high being seen today, and then from that high a correction south soon developing with the nominal 10 day cycle. Whether that 10 day top was actually made in today's session remains to be seen, but if it was not then - in terms of time at least - it should not be too far off here. And, once complete, we should see another try at the 9 day moving average or lower on the next minor correction south.
Current analysis: The NDX also gapped lower, here holding at the 1498.17 level at the session peak and then trading all the way down to an intraday low of 1476.06 before managing to close back above current weekly support. Volume here came in at 1.64 billion shares, which is also about a 5% expansion on this index (from yesterday's figures) and should indicate that today's low is going to be tested or exceeded in the next day or two.
So far the 10 day cycle phase is playing out correctly this week, with an early high in Monday's session leading to the expected correction lower with this component. You can see on the daily chart (chart 2) that prices did retrace back to the 9 day moving average, which was the minimum expectation noted from both Sunday's and last night's outlook.
If the notes from recent days are going to be correct, then the current decline should hold above the lower end of support on a closing basis (approximately 1460 NDX CASH), and should be followed by another try at Monday’s swing top on the next 10 day up phase. As well, with Tuesday’s gap lower there is a gap that needs to be filled at the 1509 level, and thus I would think this should be the minimum upside after this 10 day low is in place. We'll see how Wednesday's trading plays out around support and then take another look tomorrow night.
Jim Curry
Market Turns Advisory
Email: jcurry@cycle-wave.com
