Monday’s Reversals (Yes, That’s Plural)

Monday’s negatives were almost too many to enumerate. In no particular order they include: a 9:1 down day, a breach of our first support/trading stop at 926, a near term momentum reversal from up to down for 23 of the 27 S&P industry groups, a triple-bottom P&F sell on the S&P 500 (using a 5x3 chart), and a reversal by the “500’s” bullish percent indicator through its 10-dama. There are more, but we think you get the point.

S&P 500
There is one missing ingredient. The S&P has not violated its dominant trend line. For us, that trend line begins on March 17, not March 6, although we would not quibble with either March 20 or March 30 as a starting point. That trend line is currently at 919.82 and rising at 2.74 points per day. A close below that trend line – and preferably an entire day below it – would be the last confirming signal that both the post-March trend and the 22-week cycle had reversed to the downside. In coming blogs, we will report on the S&P relative to this trend line.

Note that in the above list of negatives, we did not include intermediate momentum. We have made the case that our primary intermediate oscillator had the potential to maintain a bullish bias into late June or early July. Thus, it was and is conceivable that a near term peak would begin to have negative intermediate implications. While it will take a close below 896 this week to mathematically turn the weekly Coppock Curve down for the first time since March, we would not be surprised if a substantial plurality of the 27 industry groups experience their own weekly reversals this week, even if the S&P itself does not. We would consider anything more than 10 group reversals to be “substantial.”

From an Elliott Wave perspective, we can now count five waves up from the March low. BUT the structure is internally corrective. If this hold firm, we will need to respect the idea that the “new bull market” was an inherently weak diagonal triangle pattern. That, in turn, would suggest that the “new bull market” is/was actually the “C” wave of an ABC bear market rally that has been in play since November’s low. We’ve said it before, and we’ll say it again: Be careful out there.

Possible Elliott Wave Bear Market Rally

With the break of 926, our focus is now on the 866-879 range. If the former was a first support/trading stop level, a breach of the latter would have more intermediate significance, especially if our Elliott Wave comment proves to be accurate. In a similar vein, yesterday’s reversal suggests that we reduce our resistance focus to 956, from 982.