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Pop Goes the Bubble

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Technical indicators support what the market averages did last week. That popping sound was no mirage. It was the sound of a bursting bubble.

The good news for bears is that the technical indicators rolled over, but only the shortest term indicators got “oversold.” Intermediate indicators are not yet near extremes. And if short term indicators go lower early in the week, that would increase the odds of a crash, right now.

Cycles – All cycles remain xxxx xx xxxx xxxx (subscriber version). Only short term cycles point to xx xxxx later in the week. That currently projects in a range of xxxx xxxx . The odds of getting deep into that projected range look good.

Initial projections for the 6 month and 10-12 month cycles point to xxxx-xxxx (subscriber version), but the 6 month cycle low would ideally come between late February and xxxx xxxx . That’s plenty of time for that projection to shift lower. The 13 week cycle projection is xxxx. I think that is a good benchmark to watch for at this time.

Third Rail Chart-  The first top is complete. xxxx xxxx is now key support. If they try to bounce on Monday, I expect resistance at 4450 stop any rally attempt.  On the other hand, a crash is possible, if not likely if they take out xxxx xx xxxx xxxx (subscriber version). The conventional measured move target would be xxxx.

Long Term Weekly- Long term cycle momentum has broken a 2 year uptrend, signaling that the bull market xxxx xxxx .. When long term momentum and 3-4 year cycle momentum break their midyear 2021 lows, and the SPX ends a week below xxxx, then I’d call it a bear market. That would imply that prices are headed a lot lower for a lot longer. We’re not there yet, but we will be quickly if this keeps up like last week.

I have revisited long term cycle projections. Last week’s move suggests more frequent updates than the usual quarterly schedule will be needed on these. So far, there’s no material change in the projections, but I now believe that they are wrong and will not be met. I explain why in the report. I’m giving these no weight, and instead focusing on the price patterns, support breaks, and cycle indicators to show us the way.

Monthly Chart – The market is now below two long term trendlines. It would need to get back above xxxx by the end of January to reverse the bearish implications of this break. If that does not happen, the target in February would be xxxx xxxx. Ouch.

Cycle screening measures broke down after behaving in a way that suggested changing market dynamics in the previous week. The numbers are not yet extreme on the downside. They could get a lot worse before a significant bottom is in.

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These reports are not investment advice. They are for informational purposes, intended for an audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance. 

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