The End of the Trump Rally

A number of analysts, citing various combinations of indicators, are saying that the so called Trump Rally that started after the election has ended.  Here I'll show that all one needs is the Midas TopFinder algorithm to know that that rally has just now ended.

Look at my Jan. 1, 2017 post here called The Intermediate Term Market, an analysis of the weekly bars chart of SPY.  It shows the beginning of the rally in early November.  I said, "...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."

After Jan. 1, that brief weakness reversed and the market resumed the strong uptrend.  The Jan. weakness was the first pullback within that strong uptrend.  Since that pullback was far above the Midas S curve launched from the beginning of the trend, that meets the definition of an accelerated uptrend, so one may fit a Midas TopFinder curve to that pullback which I have done in this new chart updated to yesterday.

The value of the fitting parameter D that is necessary to make the curve fit the Jan. pullback is 7.6 billion shares of cumulative volume.  In the upper pane we see that the actual cumulative volume since the election is 7.477 billion shares, which is 98% of D.  That's close enough to declare that the TopFincer curve has ended, and thus the Trump Rally is over.

Now, as I've emphasized in these blog posts many times, the TopFinder is a concurrent indicator, not a predictive one.  It has identified that now is the end of that rally, but it does not predict what comes next.  Typically, after such an end, we get some kind of a consolidation, after which the market does something new, which could be either a down move or an up move.  All we can be fairly certain of is that the accelerated uptrend that has come to be known as the Trump Rally has ended.

Short Term Timeframe

This is the fourth and last blog post in this series, here showing the short term status of the market as displayed on the daily bars chart...

Here an accelerated uptrend started in early November last year, with the TopFinder TF fitted to it, and spawning a three-fold hierarchy of Midas support curves - S1, S2 and S3.  The TF ended last Thursday, but about two weeks earlier, price definitively broke and closed below TF.  So, the TopFinder came to a premature end.  Is this a failure of the methodology?  No, it means some exogenous unexpected event abruptly changed the behavior of the market, breaking the TopFinder.  Sometimes, this can and does happen.  Up until that break, the TF was correctly telling us that the market was in an accelerated uptrend.  And at that break, the TF gave us a prescient early notice that the uptrend has ended.  Since then, price has broken down through S3 and S2.

We now see that we are in a new downtrend that started at the mid October peak, spawning a hierarchy of Midas resistance curves (red).  We don't know, and cannot predict, how low this downtrend will go, but we have identified a ladder of support levels under the current price - the S1 of this chart, the level of the S1 from the weekly bars chart, and the level of S3 from the monthly bars chart.  Going forward, if we see price turning up at one of these levels, that could well be the end of this downtrend. 

This ends my four blog post review of the market.  HAPPY NEW YEAR EVERYONE!

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.