Technical Strategy Video:
Key Takeaways
- Trends & momentum have begun to stall a bit near-term, though the Wave pattern argues for a bit more fractional strength above early Nov peaks before any Top
- Crude Oil weakening looks to extend short-term, but should be complete into next week
- US Dollar now in a price/time area where this might peak out; Conversely, EURUSD should be bottoming and expect a sharp bounce into December/early next year
Minor stalling in SPX doesn’t necessarily signal a top, but would be more important on the ability to lift back over November peaks near 4765-75. As hourly charts show below, after a three-wave pullback into 11/10, the resulting rally has indeed been constructive in pushing higher in five waves off the lows. Normally this will result in a minor stalling; Yet the daily wave structure does not look complete here, and counter-trend exhaustion per DeMark indicators remains premature. So, it’s still right to expect upside here, for now. SPX could pull back to 4663 without doing any damage, and it’s only important if 4631 is violated, which would put the bearish case on the front burner.
Key Technical Developments to watch for during the balance of this week
- Traditional technical momentum gauges like MACD have in fact rolled over to negative, despite just a minor point S&P pullback into last week. RSI has gotten overbought and diverging a bit on the retest. Any push back to new highs likely still results in negative divergence that could be bearish as markets near a short-term inflection point
- Breadth has wavered a bit in recent days; Wednesday’s trading brought about nearly 3/1 negative Advance/Decline. Poor breadth near All-time Highs is a short-term negative
- DeMark indicators thus far are NOT in confluence on daily charts, nor Intraday timeframes like 120, 240 min basis, but this would happen on a bit further strength
- An important 45-day cycle is approaching from early October lows which might result in changes of trend in a few different assets this week
- Defensive relative strength should be eyed carefully as this normally crops up ahead of Short-term market peaks
- Energy weakness is picking up steam; yet should prove temporary into next week
As seen below, WTI Crude is continuing its decline that began back in mid-October. Prices undercut prior lows from early November today, Wednesday 11/17, and could bring about further weakness over the next week. Importantly, this doesn’t look to be a major peak in Crude given the Elliott-wave structure, but merely a short—term decline in a normally seasonally weak period. Pullbacks to the mid-70’s should prove to be buyable into late November, and technically I anticipate WTI Crude rallying back to new all-time highs.
Euro looks ready to bottom out vs US Dollar, and a stabilization process and reversal looks to be near
EURUSD looks to be nearing an important inflection point, & my analysis supports the view that we’ll see a bottoming out in EURUSD and turn back higher which should happen over the next 4-6 weeks but could happen as early as this week. This stems from the following reasons
- Oversold conditions on both daily and weekly basis
- Elliott-wave structure
- DeMark counter-trend indicators which are lining up on daily and weekly timeframes
- Fibonacci Support at 1.128 for EURUSD which after giving back 61.8% of the rally off the March 2020 lows, is likely to start to stabilize here
- 7 Year trendline support from 2014 which shows prices nearing an important juncture
- DXY itself has risen to test 50% of the decline from last year(Also an important area)~ 96
IF US Growth starts to show any inkling of slowing in the weeks to come, this would add conviction to the idea that the US Dollar would peak out and EURUSD should bottom. Weekly charts of EURUSD below show the oversold conditions right as the Euro is hitting 61.8% Fib support
