Sorry!! The article you are trying to read is not available now.
Email your questions

A Look at the SPX Quarterly Swing Chart

Aug 07, 2014 7:52 am Print Print

There was every excuse for the indices to follow through to the downside from Wednesday's gap.

However, after some backing and filling, the market held with the SPX eking out a flat day -- another close at the key 1920/1921 level discussed yesterday. The market seems to know this level. Whether the SPX is bear-flagging here at 1920 or consolidating is the question.

Yesterday, the SPX set a new low for the move into the time frame of a presumed turning point, and close enough to an idealized level of 180 degrees down at 1903 to take notice.

That said we've all become, by necessity, BTD (by the dip) detectives in the last few years as each shallow setback has carved out a pivot for new highs.

If the market is inclined to try for a new high, it is going to be a battle between a potentially bullish possible third higher low on the SPX at another test of its 50 dma and that of a bearish looking break of a rising wedge.

The RUT turned its 3 Day Chart up yesterday. The prior occurrence saw the index gap down the next session.

A change in behavior could see the index backtest its 200 dma into gapfill near 1140.

As on the SPX, there are dueling patterns on the RUT.

There is a Megaphone Top for 2014 on the clock (and a big potential double top). At the same time, arguably, the RUT may be tracing out a 7-month inverse Head & Shoulders.

It is worth considering that the spring turndown was 50 sessions ago now and that this will weigh on the 50-day moving averages on the indices. So the 50 dma's could be rolling over soon if there is not impulsive upside price action.

Notably, the last time the 50 dma on the RUT converged with the 200, the RUT exploded to the topside. A failure to generate upside traction as the two averages meet and a possible subsequent crossover of the 50 below the 200 would be a sign of the bear.

Pulling back the lens on the SPX shows the Quarterly Swing Chart hasn't turned down since 2011. To say it is stretched is an understatement.

Note that even in the advance from the 2002 low, there were frequent turn downs in the quarterlies. That was a real stair-step rally compared to the escalator since 2011.

Interestingly, despite the many turndowns in the Quarterly Swing Chart from 2003 to 2007, there were really no signal reversal bar quarters until the 4th quarter of 2007. Notably, the 3rd quarter in 2007 was an outside up quarter. The presumption is the outside up quarter should have put the SPX in a position to power convincingly above the 2000 peak. However, instead, the next quarter left bearish Train Tracks. When Q1 in 2008 snapped the low of the prior outside up 3rd quarter, it triggered a Reversal of a Reversal sell signal. The crash of '08 followed that signal.

We are not yet mid-way through the 3rd quarter of 2014; however, further downside pressure could see quarterly Train Tracks. It would take a close near or lower than last quarter's lows. The last quarter low on the SPX was 1814.36. That's not far-fetched. Notably, the SPX hasn't had a down quarter since 7 quarters back -- just prior to the breakout above the 2000 and 2007 peaks.

Conclusion. The shallow 3-5% correction that many players were praying for has materialized. However, the market is stretched based on the action in the Quarterly Swing Chart. Consider for a moment that the above chart were not a quarterly SPX but a daily. Would a backtest of the breakout level be unexpected? If a reversion to the mean of the SPX's persistency and consistency plays out, a 20% correction ties to a backtest of the 2000/2007 tops.



    • 2017
      • December 2017
        November 2017
        October 2017
        September 2017
        August 2017
        July 2017
        June 2017
        May 2017
        April 2017
        March 2017
        February 2017
        January 2017
    • 2016
      • December 2016
        November 2016
        October 2016
        September 2016
        August 2016
        July 2016
        June 2016
        May 2016
        April 2016
        March 2016
        February 2016
        January 2016
    • 2015
      • December 2015
        November 2015
        October 2015
        September 2015
        August 2015
        July 2015
        June 2015
        May 2015
        April 2015
        March 2015
        February 2015
        January 2015
    • 2014
      • December 2014
        November 2014
        October 2014
        September 2014
        August 2014
        July 2014
        June 2014
        May 2014
        April 2014
        March 2014
        February 2014
        January 2014
    • 2013
      • December 2013
        November 2013
        October 2013
        September 2013
        August 2013
        July 2013
        June 2013
        May 2013
        April 2013
        March 2013
        February 2013
        January 2013
    • 2012
      • December 2012
        November 2012
        October 2012
        September 2012
        August 2012
        July 2012
        June 2012
        May 2012
        April 2012
        March 2012
        February 2012
        January 2012
    • 2011
      • December 2011
        November 2011
        October 2011
        September 2011
        August 2011
        July 2011
        June 2011
        May 2011
        April 2011
        March 2011
        February 2011
        January 2011
    • 2010
      • December 2010
        November 2010
        October 2010
        September 2010
        August 2010
        July 2010
        June 2010
        May 2010
        April 2010
        March 2010
        February 2010
        January 2010
    • 2009
      • December 2009
        November 2009
        October 2009
        September 2009
        August 2009
        July 2009
        June 2009
        May 2009
        April 2009
        March 2009
        February 2009
        January 2009
    • 2008
      • December 2008
        November 2008
        October 2008
        September 2008
        August 2008
        July 2008
        June 2008
        May 2008
        April 2008
        March 2008
        February 2008
        January 2008
    • 2007
      • December 2007
        November 2007
        October 2007
        September 2007
        August 2007
        July 2007
        June 2007
        May 2007
        April 2007
        March 2007
        February 2007
        January 2007

Cooper's Books and DVDs

Learn more about the techniques and strategies that Jeff has developed through the years to trade successfully.

Close or Esc key
You are now leaving the web server.
Thank you very much for visiting!
We hope your visit was informative and enjoyable.
Buy Now
Buy Now
Buy Now
Buy Now