The near-term moment of truth is approaching for SPX following the sharp one-month rally from mid-October. Tuesday’s resilience in Equities failed to give up much ground despite reports of Russian missiles having landed in Poland. In the short run, the combination of upside resistance coinciding with DeMark exhaustion possibly approaching, and one short-term cycle peaking gives rise to the possibility of a potential near-term selloff into next Tuesday/Wednesday ahead of a bounce into early December. Given that Yields and the US Dollar look close to bottoming makes trusting this recent bounce in Technology difficult for now. One should consider SPX- 4120 important given the larger downtrend intersecting this area along with equal wave extension targets from mid-October lows. Finally, the predictable mid-month cycle has returned, suggesting that pressing long bets here is unwise barring consolidation into next week. Bottom line, remaining above 3850 keeps this SPX trend positive, while upside resistance hits at 4120.
Technology likely to stall out with relative charts pressing back into former lows
Technology should be watched carefully following QQQ -0.14% vs. SPY -0.17% having rallied back to important short-term resistance defined by prior lows from June. Daily Symbolik charts show the breakdown in QQQ vs. SPY having rallied back to test the area of October’s breakdown.
Given that both QQQ on absolute charts along with the ratio in QQQ/SPY have rallied to within striking distance of prior lows, which were violated this past Fall, it’s thought that Technology might need to consolidate its recent runup.
Another factor which says this might be possible is the formation of DeMark counts that look to be 1-2 days away on daily charts.
Finally, my daily short-term cycles look to peak late week, while bottoming out on 11/22-23, before rallying back into early December. At this time, until/unless treasury yields turn up sharply, it will be difficult to make much of markets doing anything else but stalling out. Yet, some kind of a minor reaction looks likely starting Thursday/Friday of this week. Given that Geopolitical tension has ratcheted up in the last 24 hours and could be a factor in the weeks to come, it doesn’t look wrong to reduce exposure in Technology and await consolidation.
SPX short-term cycle shows a peak possible this week
Given the same cycle composite which peaked out this past Spring and also into early Fall, we’re now faced with the possibility that another minor peak could be in place.
Note, my prior time-based studies focused on a 50% time retracement of the 3/23/20-1/3/22 which hits next week. Furthermore, when measuring the length of time from January to June and projecting forward, a 100% time-based extension also hits in late November.
Thus, given that the bias of 10-year, 20-year and 60-year cycles remains quite positive and upward sloping into December, I’m more apt to expect a short-term pullback only before further strength into 12/5 (which would line up with the 60-year cycle from 1962).
Until/unless 3850 is violated, it should be right to buy all dips if/when given the chance.
Larger SPX cycle shows some conflicting signals, but remains positive until January
Key to focus on below is the cycle composite relative to the current dominant cycle. When both of these are trending higher, Equity markets tend to fare quite well, which happened in Spring of 2020 and 2021 when both started trending higher (Bullish), or in early 2022 and August-October 2022 lower (Bearish) (In other words, the red line and the pink line below are moving in the same direction).
Meanwhile, when they conflict, like what happened from February -April 2022, the larger trend sometimes is vulnerable to counter-trend movement. This will take place again from November expiration into end of year on the dominant cycle turning down (This marked the peak from January 2022, late April 2022, and August 2022) while the broader cycle composite stays positive into January.
Thus, some conflicting signals begin starting late this week, as one cycle view turns down, while another remains pointed higher. Until/unless there is some resolution of SPX and NASDAQ breaking their respective downtrends, DeMark counts being recycled, and/or any minor downturn being overridden into early December, I expect that our current rally very well could stall out a bit near-term. Technology might give way to consolidation, yet Healthcare and Energy remain strong. I’ll advocate staying long until/unless the trend starts to reverse, with upside targets just above 4100 near 4120, while key support lies at 3850.
