The Intermediate Term Market

This is the third of four blog posts on the current status of the market, here the intermediate term timeframe, as shown on this weekly bars chart...

An uptrend (not accelerated) started in early February 2016.  Its first pullback supported at the first Midas support curve, but the second pullback strongly broke down through the second Midas support curve.  This means that uptrend ended.  But quite dramatically, the strong down week that ended that trend came to a screeching halt right at the level of the S2 support curve on the monthly bars chart.  From there, price bounced up sharply into a new uptrend.  The most recent few weeks have shown some weakness, but we're still far above the support curve for this trend, so we're still in an uptrend on this timeframe.

The Long Term Market

This is the second of four blog posts on the current status of the market.  Here is the monthly bars chart of SPY...

On this timeframe, we see an accelerated uptrend that started mid-2011, with its fitted TopFinder TF1 which ended in mid-2014.  This was followed by a two year long trading range, bracketed by the blue lines.  While still in that trading range, a new accelerated uptrend started in late 2015, spawning a three-fold hierarchy of Midas support curves (S1, S2 and S3), along with the fitted TopFinder TF2 which is currently about 57% through its duration of 46 billion shares of cumulative volume.  The purple vertical line marks the projected end of this accelerated uptrend.  And as I said in the last post, ignore the dates that the plotting program has placed on the horizontal axis going into the future.  We will know when the trend ends when we get there, but not before.

Year-, Quarter-, Month- and Week-end Reviews

[Corrected]

We are now (Jan. 1) at the end of the week, the month, the quarter and the year.  It's time to review what the market, as exemplified by SPY, is doing on all four of these timeframes:

•  Very Long Term - Quarterly bars chart
•  Long Term - Monthly bars chart
•  Intermediate Term - Weekly bars chart
•  Short Term - Daily bars chart.

I'll do this in four blog posts here, starting with this one, Very Long Term.

But first, let me reiterate my general understanding:  One cannot predict the market.  Technical analysis, including my Midas methodologies, does not and cannot predict what prices will do in the future.  Rather, it shows what the market is doing in the present, and it is exquisitely good at detecting and signaling when the market's behavior has changed so that you may keep your trading in line with the market.  And that's how to make money in the market, not by following a prediction, but rather by carefully staying in sync with the market.  So, nowhere in my posts here am I making any prediction of the future movement of the market.

The Very Long Term, the quarterly bars chart

Here is the quarterly bars chart of SPY from its 1993 inception, plotted in candle volume display...

The market has been in an uptrend since that historic bottom in early 2009.  There was a modest pullback in 2011, but from there it launched into an accelerated uptrend.  The definition of accelerated is that the first pullback (here in 2015) occurs far above the Midas support curve launched from the beginning of the accelerated trend - the middle green curve here.  When this happens, we may fit a TopFinder curve (TF) to the trend, the purple curve here.  The value of the free variable, the fitting parameter D, needed to fit the curve to the pullback is the projected total cumulative volume that the trend will have consumed when it ends.  Here, D is 350 billion shares.  Right now, the accelerated trend's cumulative volume is 47.5% of D, so at present we are a little less than half way through the duration of this accelerated trend as measured by cumulative volume.  Since the chart's horizontal axis is linear in cumulative volume, not time, I can and have placed that dashed purple vertical line at the horizontal location corresponding to 350 billion shares of cum vol, which is the projected horizontal location of the end of this trend. 

Notice that this is not a prediction of when and at what price the trend will end; we don't know when and at what price, but we will know when we get there because D will have been fully consumed.  The date we get there depends entirely on what the trading volume per quarter will be going forward, which we don't know.  This chart is produced by MetaStock, and that program makes some very dubious assumptions about what the future trading volume per quarter will be and places dates in the future accordingly.  Those date should be completely ignored.

Conclusion:  On this timeframe the market is nearly half way in cum vol through an accelerated uptrend that began in mid 2011. 

Gold, Long Term

For several years I've been following the accelerated long term uptrend in gold which started in 2008.  For good price and volume trading data, I've been using GLD, the gold etf, since it tracks (one tenth of) the price of gold very closely and since its volume data captures the sentiments of gold traders.  From time to time, I've shared with friends my monthly bars chart of GLD which contains the Midas S curves and TopFinder (TF).  But before today, I hadn't looked at it for many months.  So, after yesterday's big drop in gold, this morning I pulled up this chart to see what it can tell us.  Here it is, updated through yesterday, but otherwise not altered in any way:

The TopFinder, TF2, followed the uptrend, and ended at the end of July 2011.  Immediately after that, price popped up into what I call an Overhead Consolidation, a formation that I explain in detail in our book.  Briefly, it is one of the forms of a consolidation that can follow the end of a TF.  

Notice that in late 2011, price broke and closed below S4.  If one were not using the TF, that event would've signaled the end of the uptrend, five months after the TF signaled it.  

Yesterday's price drop drove the April price bar well below both S3 and S2.  The month isn't over yet, so we don't know where this bar is going to close.  If it closes below S3, then we're in a new long term downtrend in gold.  However, if it closes above S3, then that bar will be what the Wyckoff folks call a Spring, which is actually bullish.  I'll revisit this chart and post it again here after the end of the month.

S&P Short Term - End of Uptrend

In my last post here I noted that since we are in the late stages of the short term uptrend of the S&P 500, we should watch closely for a break and close below S4, which would signal the end of the trend.  That event happened yesterday, as shown on this daily bars chart.

I have begun the resistance curve R1 from this trend's high of last Thursday.  For the moment, price is confined between R1 and S3.  As long as it remains so confined, all we can say is that we're in a consolidation.  A break and close either above R1 or below S3 would indicate the start of a new trend in that respective direction.

S&P Short Term - In A Well Behaved, Maturing Uptrend

This is the daily bars chart of the S&P 500 since last October, updated thru yesterday.  I call this "short term" to differentiate it from that of the weekly bars or longer time frame chart.

This shows an uptrend that started mid last November.  I call it "well behaved" because each pullback in price - late December, mid February and just last week - has settled down to and turned right around at the then highest Midas support curve in its hierarchy of curves.  From last week's low we launch S4, the next curve in the hierarchy.  Yesterday price broke very strongly above the previous high of this uptrend, showing that this uptrend is alive and well and just chugging right along.

This is a classic, text book example of an uptrend being followed by a hierarchy of Midas support curves.  Typically, such an uptrend will spawn a hierarchy of four support curves, plus or minus one, before it ends; rarely more than five.

Since this uptrend is now into S4 of its hierarchy, it is likely late in its life, hence my calling it "mature". At the point after S4 starts, one should pay close attention to it, watching for a pullback that penetrates and closes below S4.  When that happens, that's the signal that the uptrend has ended.

Some may wonder why I have not fitted a Midas TopFinder (TF) to this uptrend to get a projection of when it will end.  A TF only is applicable if the trend is accelerated, which means the first significant price pullback turns around far above S1.  Clearly, we don't have that here, so the TF cannot be applied.  We'll know the uptrend has ended once price breaks and closes below the highest S curve.

Update on AAPL, Intermediate Term

A few weeks ago, in my old now-deceased blog, I posted an analysis of the intermediate term view of Apple's stock (AAPL).  I showed that since its peak last September, it has been in an accelerating down trend, that price had broken below important support, that the head & shoulders pattern projected a downside target price of 313, and that the Midas BottomFinder (BF) projected that it was about two thirds complete in terms of cumulative volume.

This chart shown here (weekly bars) updates what has happened since that last post.





We see that price pulled up a bit in late March, hit the R3 resistance curve, and then turned down again.  That pull-up in price provides another potential place to which to fit the BF.  In my first post, the BF was fit to the pull-up of early December, marked by the upper arrow here.  In the chapter of our book on fitting the TopFinder/BottomFinder, I advise that when there are two significant pull backs in price, one should attempt to fit the TF/BF curve to both as long as the fit isn't too far off from either one.  In my original fit to the Dec. peak only, a duration D of 34 million shares of cumulative volume was needed.  Now I'm finding that a compromise fit to both of these peaks (the two arrows) requires a duration D of 38 million shares.  Doing so I see that the down trend is now 71.4% complete, and I have accordingly adjusted the projected horizontal location of the end of the downtrend.  Assuming that the average weekly trading volume rate continues as it has been, the first fit projected the end of the trend would come approximately in late May, but this new adjustment to the fit is now showing late June.  Of course, if the weekly trading volume changes significantly going forward, the end of the trend would come at a different date, whatever the date is on which the total D of 38 million shares of cumulative volume are fully expended.