Current analysis: The SPX opened to a quick selloff, holding above the recent lows ontoday’s intraday tag of 1187.80 before spending most of the day in consolidationmode. Late in the session the index broke to the upside above the 1193.52 area(Wednesday’s high and short-term resistance), calling in additional upside and a testof 1196-1200 SPX CASH. Volume here came in at 1.5 billion shares, which is about even withWednesday’s figures here.
As per the notes from recent outlooks, this index would have had the better‘look’ had it made new swing lows below 1184 here at some point this week, buttoday’s turn up in both the 10 and 20 day oscillators may have thwarted thataction and the lows for the same could now be in place. Having said that, high volumedeclines are usually fully tested again at some point, which indicates that we couldbe right ack down to the 1184 area after whatever upside is completed here. Notedlast night, 5-10% of the time this pattern will not occur - and possibility that is what we are witnessing this time around. However, it usually pays totrade with the statistics rather than against them, which means we probably should be nobetter than very cautiously bullish here.
From previous outlook: "once the current 20 daycycle bottoms out here, what should we expect with the next upward phase of this cycle?The statistical evidence for this particular component indicates that the next rallyhigher is likely to be in the 2.1% (minimum) to the 2.7% range or greater. The smaller2.1% figure is the minimum rally going into a 20 day top, stretching all the way back intoearly 2003 for this data. However, 91% of the up phases of the 20 day cycle have witnessedrallies of 2.7% or better, while the greater majority (82%) of these have seen rallies of3.2% or higher. In terms of time, the minimum time rally going from a 20 day trough intothe following peak for the same cycle has lasted a minimum of 4 trading days, while 90%have seen their rallies lasting at least 6 days - and a full 80% of these have lasted 8trading days or better."
Current analysis: If the low is actually in for the 20 day cycle then the statisticalanalysis from last night would indicate a potential move to or above the 1215 area isgoing to be seen, as 90% of the 20 day up phases have rallied 2.7% or greater and havetaken 4 trading days or more before peaking out. If Tuesday’s low was the 20 daybottom, then 4 trading days along would indicate that higher highs would be in store untilat least February 28th or later, with at least decentodds that price could be seeing higher highs into March 2nd orlater.
For the bigger picture, we have so far held above major trendline support on this swingdown, which still invites a potential test of the 1217-1230 range in the coming weeks -provided again that it continues to hold. Of the above, the 1227-1230 region is the mostcritical to me here, as this range of resistance is major ‘make or break’resistance on the daily chart. This is even more critical now that the Trendicator isflattening out, as we know that this indicator will usually flatten out before a trendchange is seen. Whether or not it will actually turn south in the coming days/weeksremains to be seen, but if it does then the probabilities will be good that a larger peakis inplace -with a test of the 180 day moving average on the daily chart - or lower -expected to be seen going into the month of May. Stay tuned.
NASDAQ 100 CASH
Daily Projected Support and Resistance levels: High, 1531 - Low, 1505
5-Day Projected Support and Resistance levels: High, 1538 - Low, 1489
Monthly Projected Support and Resistance levels: High, 1577 - Low, 1422
Current NDX Index Positions:
Mid-Term (6-8 weeks) = 50% BULLISH from 1591.93
Short-term (1 day - 3 weeks) = 50% BULLISH from 1495.07 (scaled-back at today’sclose)
From previous outlook: "volume onthis index came in solidly lighter - however, unlike the SPX the NDX actually registerednew swing lows for the move today. Volume came in here at 1.87 billionshares, which is a 10% contraction in the volume numbers originally seen on Tuesday. Weknow that volume contractions in the 8% range or higher can be associated with short-termprice lows -and such then are ‘usually’ seen as bullish indications. Having saidthat as well, between the two indexes the SPX is more statistically solid, and I wouldrather see the same pattern on that index for a more bullish inference here. Possibly wemay see that as well in the coming days. Otherwise, once the 10 and 20 day cycle downphases are complete here, 9 and 18 day moving averages should start to act as upsidemagnets to price. These are currently in the low 1520’s on this index, but could beat lower levels by the time the lows for these components are in place."
Current analysis: As per the notes from last night, the NDX’s low volume break tonew lows in Wednesday’s session was considered a short-term bullish indication forthis index, as volume contractions in the 8% range or better near cyclic lows will usuallylead to upside action. Though I would have rather have seen the same pattern on the SPX,this setup did give us some decent profits on the shortterm leveraged position taken herein recent sessions and scaled-back at today’s close. Overall volume came in at 2.0billion shares, which is a 7% expansion from Wednesday’s numbers here and give usabout 90% odds or better that a higher high is still out there for the short-term.
Are the 10 and 20 day cycle lows in place here? It looks like it. As noted last night,once the bottoms for these cycles were in place here the probabilities favored a run backto the 9 and 18 day moving averages on the daily chart, which we were closed to taggingtoday intraday. Having said that, normal NDX rallies coming off a 20 day low are usuallyin the 4-7% range or better, which could indicate a potential re-test of the 45 and 90 daymoving averages could be seen in the coming days - provided that the 1489 swing low holdsthe downside here.
Jim Curry
Market Turns Advisory
Email: jcurry@cycle-wave.com
