Saturday 25 January 2014

Has the grand wave from Oct 2011 completed?

It was the biggest weekly decline for US equities since May 2012, with the sp' -48pts (-2.6%) @ 1790. The ultimate question is whether this is just another little wave lower - similar to Aug'2013, or is the grand wave'3 complete @ 1850 ? We'll likely know within the next few weeks.


sp'weekly4



sp'weekly - poster 'Witold'


Summary

I was kindly sent the second chart earlier today by poster 'Witold', and it has certainly made me reconsider the notion that the top of the current grand wave - from Oct'2011, is already in.

My own original outlook was that we would see 'broad upside' into the late spring (certainly, bulls still have seasonal factors in their favour), with a target zone of sp'1950/2050. However, I could be wrong, and I do genuinely try to keep an open mind, despite having a primary outlook that I'll highlight almost every day.


Is the top in?

I think we'll know..if..and only if, we come VERY close - within 5/10pts..if not actually hitting the lower weekly bollinger band on the current wave.

A closer look...

sp'weekly8


Right now, the lower bollinger is at 1669, and is rising at around 10pts a week. By end February, the lower bol will be around 1750/60.

So..if late Feb..the market is 1750..or lower..then I will have high confidence a top is in. On the flip side..if we're back in the 1800s late Feb/early March, I'll hold to my original outlook..with upside into April/May.

I would suggest anyone also look at the price action from 1998 and 2011, as two examples for what I am seeking.

sp'weekly - 1998 collapse wave


sp'weekly - 2011 collapse wave


That is more than enough to conclude what turned out to be a pretty dynamic week!

Goodnight from London
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The weekend post - late Saturday, will be on the US weekly indexes