LET’S LOOK AT THE S&P 500 DAILY CHART
On CNBC EUROPE Friday I indicated the low on 15th could be the exhaustion of this leg. Historically it is a bit short in price and time but this was the exhaustion phase of the trend as indicated by the three descending trendlines. If the fast trend were to remain intact the rally would not exceed 3 days and today was the 4th day so this rally should be able to move up into the time window of 7 to 12 trading days from low or what I refer to as a second degree counter trend. The 30th or 10 trading days looks like the best “time” for this rally to end. I was surprised by yesterday’s strength but it did close on the high and that may have exhausted many of the buyers at least temporarily. The objective for this rally is only 1290 to 1300 so it should start congesting. If it can move above 1341 the bear trend is in doubt.
So we are looking for the index to rally into the 30th and come back to test this last low. It could marginally break the low but 90% of this leg down appears complete, again this leg down. We were looking for 1180 worst case 1160 and it hit 1200. The consensus reading at the low were at extremes, some even setting records as the percentage of stocks hitting new 52 week lows. But I still want to see a test of these lows in a few weeks.
LET’S LOOK AT THE DOLLLAR INDEX
One of the rules in technical analysis is the 4th test of a support or resistance will carry a strong probability of breaking away from the sideways pattern. This may not be the best example since the rally up from the third test in this picture didn’t get very far and the move to new lows could have all been part of the 3rd test. But I’m sure you can get the idea. Now there are three tests of support in the current consolidation and the downtrend remains in a strong position with descending trendlines and “spacing” between previous lows and rally highs. The last high in the Dollar Index was 90 calendar days and is the normal time period for a rally against the trend or intermediate term counter trend rally. So if the index or the Dollar is going to get legs it will come from this last low. If it rallies further and then makes a run towards this last price low again it carries a probability of moving below it and continuing the high momentum move down. I don’t know what it is going to do. But this rally is the most important of the year.
Crude Oil still looks like it hit a top of some consequence and should see 123 as first support but should get down to 112 to 115.
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