Market Turning Points Newsletter

June 5, 2011 Market Turning Points By Andre Gratian Precision timing for all time frames through a 3-dimensional approach to technical analysis: Cycles - Breadth - P&F and Fibonacci price projections “By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint." -- Mark Twain Current position of the market Very Long-term trend – The continuing strength in the indices is causing me to question whether we are in a secular bear market or two consecutive, cyclical bull/bear cycles. In any case, the very-long-term cycles are down and, if they make their lows when expected, there will be another steep and prolonged decline into 2014-16. Long-term trend - In March 2009, the SPX began a move which evolved into a bull market. Cycles point to a continuation of this trend for several more months. SPX: Intermediate trend – The SPX has met its 1370 projection and is consolidating. The odds still favor a rise to the next logical target of the low 1400s before the beginning of an intermediate correction. (There is no change from last week's analysis) Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of longer market trends. Daily market analysis of the short term trend is reserved for subscribers. If you would like to sign up for a FREE 4-week trial period of daily comments, please let me know at ajg@cybertrails.com Market Overview Every time there is a correction in the stock market after it has had a good run, there is a lot of speculation that it might be the beginning of an important decline. This is the case again today, especially when there are signs that the economy is slowing down. Last Friday, the unemployment rate ticked up to 9.1%, and the number or jobs created fell to 54K, far below the previous month's report of 232K, and far worse than what had been anticipated, and this was only one of several negative economic reports. Since the SPX filled its phase count of 1370 five weeks ago, the indices have been correcting. But there is no technical evidence that the equity indices are at the end of the bull market which started March 2009, or even that it has started an intermediate correction (yet), for that matter! This is what I intend to demonstrate in this newsletter. We'll look at the weekly, daily and hourly charts of the SPX, as well as sentiment. Chart Analysis We'll start with the Weekly Chart of the SPX. Our first observation is that the SPX is not only trading within its long-term channel, but it remains in the upper half of that channel. After two years of rising prices, there is some evidence of deceleration in the trend because the index has failed to make it all the way to the top of the channel before starting to correct. But what kind of correction is it making? Since the March 2009 low, there has only been one correction of intermediate nature, and that was during April, May and June 2010. In the first five weeks of that correction, SPX gave up 176 points, or declined at the rate of 35 points per week. During the five weeks of the current correction, the index has only dropped 72 points, declining at the rate of a little over 14 points per week. Clearly, so far, we are only in a short-term correction. Now, let's look at the indicators. When the index rose to a new high, the MACD did also without any sign of negative divergence. By contrast, when the index reached its top price in April, there was negative divergence in the MACD, suggesting that a significant high was being made. There is no such suggestion today! I believe that this will happen only after the index makes a new high and reaches its final intermediate target. The fact that the MACD is still well above the zero line is also a sign that the uptrend is not in any real trouble. The other indicator (MSO) called the top when strong negative divergence was shown. It has, since then, fallen to the low of its range, but is still declining, and this could mean that the correction has longer to go. This weekly newsletter regularly analyzes the SPX, the Dollar, Gold and oil, as well as breadth and sentiment indicators. To read the current newsletter in its entirety, please go to: www.marketurningpoints.com Click on “Newsletters” (Allow about 30 seconds to open)