Market Turning Points Newsletter July 10, 2011

July 10, 2011 Market Turning Points Week-end Report 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 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 has evolved into a bull market. Cycles point to a continuation of this trend for several more months. SPX: Intermediate trend – The intermediate correction which started in early May ended at 1258 and the uptrend has resumed. The base that was formed at the bottom of the correction carries a potential target in the 1400s. 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 In the last letter, I stated that the market was overbought and a correction would start when the indices broke their very steep trend lines. The first trend line break came after the SPX reached its 1338 phase projection, but it only produced a sideways move of a couple of days. Then the SPX went on to meet its next phase projection of 1356 before correcting. In doing so, it created a very obvious exhaustion gap in the QQQ. On Friday morning, the gap was filled with a downside gap which, in turn was subsequently filled by a rally at the close. Although some downside P&F targets and Fibonacci retracements were met in the first two hours of trading on Friday, it is unlikely that the rally which ensued marks the resumption of the uptrend. More correction is probably still before us, for a number or reasons: -- From a structural standpoint, Friday's rally is probably the “b” wave of an a-b-c corrective pattern with the “c” wave still ahead. It has a couple of options: the SPX holds above 1331, creating a mild end to the correction before the uptrend resumes, or it breaks below 1331 thereby creating a H&S pattern followed by a drop in the low 1300s. -- My view that the correction is not complete is supported by the hourly indicators which, in spite of the rally, have not given a buy signal. -- The timing and extent of the “c” wave completion is not clear. There is a 9-mo cycle low due over the next two weeks which could affect the timing and prevent the SPX from resuming its uptrend until it has bottomed. If the H&S pattern is validated, it will give us a downside target. -- The weekly indicator pattern of the SPX is still a bit of a concern. On Thursday, I said that it was now in an uptrend. That is true if only the price action is considered, but the indicators have yet to confirm the new uptrend, as we will see in the following chart. -- The daily indicators have become overbought and are just now beginning to roll over. They will need time to correct. Let's now move to the charts! Chart Analysis This is a composite of the SPX represented in three time frames: weekly, daily, and hourly. My bullish concern is with the weekly chart indicators (left). Although the price has given a buy signal by breaking a downtrend line and moving above the MAs, the bottom indicator (MSO) has only given a half-hearted one, and the MACD, although it is still positive and has turned up, will not give a confirmed buy signal until its lines have crossed, turning the histogram green. This suggests impending problems with the intermediate uptrend, but it does not tell us when they will manifest themselves. Probably not right away. This weekly newsletter regularly analyzes the SPX, the Dollar, Gold, oil, and other important indices, 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)