Price and time align to suggest Short-term Bottom
- SPX now down to meaningful price targets while time targets hit this week.
- Cycle studies show a possible bounce into mid-September.
- Crude oil likely has kicked off its decline to the low $80’s.
The decline in US Equities should be nearing a temporary bottom as August comes to a close. When combining Fibonacci ratio projections of former swings along with utilizing cyclical projections and DeMark exhaustion, all seem to support a low this week while also focusing on mid-September (which I believe could be a high). While trend into October is still likely to show volatility and likely weaken in the back half of September, my technical work suggests a pause in this decline and bounce approaching. Following a 50% retracement of the 6/16-8/16 advance in price terms, SPX has now reached the 3981 level discussed in last night’s report. The hourly chart below (snapped before prices went to new multi-day lows) shows our corrective bounce in Futures which was overlapping and gave plenty of clues that it might fail on Tuesday. Now price has retraced 50% in price and time ratios come together by Friday for a turn.
Breaking down some Time ratios to show why markets might bottom out this week
We know that many market cycles align with mid-September, as per my Cycle composite and also Gann’s Mass Pressure index, but this also aligns with 9/15, and remains the most likely time in mid-September for a possible high. Recent months have seen meaningful turning points mid-month, and I suspect September will prove to be the same.
Near-term, however, there are several time-based Fibonacci and Gann-based ratios that focus on 9/1 for a potential short-term bottom as September gets underway. As we discussed last night, 3981 is the 50% retracement area in price, but where does time come into play?
Looking back, we see that the 1/3/22-6/16/22 decline this year for SPX occurred in 164 calendar days, or 93 weeks. (Ratios of high to low and low to high ranges often can be helpful in determining turning points. For instance, a 38.2% time ratio of this decline pinpointed mid-August when SPX made its most recent high).
50% of this decline projects to 9/6, or next week. 61.8% (Fibonacci) arrives on 9/25, and a 100% time ratio points to 11/27/22. All of these have a possibility of being important.
Taking this a step further, we see that 38.2% of the 79-day decline from 3/29 into 6/16 hit right at the July lows, on 7/16. This also proved important. Now a 100% ratio in price of this decline arrives at 9/3, this Saturday.
Moreover, measuring the 6/16 to 8/16 advance of 61 days, we find that 38.2% arrives at 9/8 while 50% of that hits on 9/15/22 which could prove meaningful. Finally, the entire 3/23/20-1/3/22 advance lasted 93 weeks and 38.2% of this hits in mid-September, while a 50% ratio pinpoints late November and 61.8% of this rally lands in early February. Each of these times should be watched carefully for a change in trend.
In plain English, my analysis of most of this year’s highs and lows in attempts to forecast turning points combined with my cyclical and DeMark based analysis leads me to believe that a turn this week is likely as a low while a peak in prices likely materializes around mid-September.
Mass Pressure Index turns help to support the idea of a turn
Revisiting the Mass Pressure index, we see that this weakness in late August was specifically forecasted by this year’s composite, while a bottom and rally into mid-Month could also materialize if this composite turns out to be true again.
Given the near oversold conditions for SPX along with Elliott-wave structure and DeMark tools getting close to bottoming, I’m more convinced that the road from high to low will not be a straight line. While a downward path looks possible into early October, my analysis still favors a bounce which could materialize over the next two weeks. This year’s 2022 Mass Pressure index is shown below.
WTI Crude looks to be rolling over- $80-$82 likely into late September
While the SPX has a chance to bottom out this week, I fear that WTI Crude likely is starting to turn back lower and should test and break August lows sometime in September/October.
Elliott-wave counts look to be complete as of today, while time counts based on the original low made the first week of August also point to prices likely reaching a peak.
A few important points worth making: First, momentum has turned up given WTI Crude’s bounce over the last couple weeks. Thus, any move down to new lows likely will not cause momentum to violate August lows, creating positive divergence.
Second, a 61.8% alternate Fibonacci projection targets $81.76, which could be important support, specifically given the intermediate-term uptrend interesting near that same level.
Third, cycles seem to show Crude rallying starting in late September/October. Thus, while a near-term peak looks to be here, lows in the next 5-8 weeks’ time might be something to buy into. Energy has avoided the downdraft shown by Crude and outperformed in recent weeks/months. Thus, this pullback might cause some temporary mean reversion to the Energy trade, providing more attractive buying opportunities on weakness.
Finally, $91 is the key level of support which if broken, has little support until $85.73. Given that this level in the mid-80’s lined up with a 50% alternate projection it adds to the likelihood if/when undercut that 61.8% retracement zone could be important.
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