Quick update on the S&P500:
I showed that:
-
Equities are the only asset class left (with
cash) to see positive performance on both a relative and absolute basis. So the
investment universe as a whole is narrower
-
Every major equity market (Nikkei, FTSE, EU50,
S&P) is showing signs of internal deterioration, ie equity markets
themselves are becoming narrower
-
Within equities the S&P is the strongest
market and shows clear sign of over leverage, crowding and deterioration
-
Projections taken from long, medium and short
term patterns are forming a very significant cluster in the area between 1720
and 1830 (Chart 1 , golden rectangle)
-
Elliott wave short, medium and long term
patterns will be perfectly traced if we move just a bit higher than yesterday
(see chart 2 for a better detail)
-
We have a MACD divergence signal
-
One of the sector that has shown strength since
the 2011 bottom is now very close to its own targets (Chart 3, Financials).
Divergences (not shown) are also forming on both daily and weekly levels, and
patterns would be concluded by a small move higher
-
If we look at the least loved sector (Materials)
, we have a classic reversal formation: a rising wedge with a clear MACD
divergence (chart4)
Conclusion
A break of the 26th July low at 1670 (on the
future contract) would be a warning (break of previous high and short
term support) that the S&P500 may be turning south.
A confirmation of this possibility would come from
a break of previous support at around 1600:
-
This is the level of previous tops in 2000 and
2007: a move below this level means that the move up from april and the new
highs are just a “bull trap”
-
A break of 1600 would also coincide with a
break of the trendline that has supported the move from the bottom in
2011
-
A move below this level would as a minimum
signal that a correction of the same order of magnitude of the one we had in
2012 has a very high possibility of happening
Chart1 –
Weekly
Chart2 – Daily
Chart3 – Financials
Chart4 – Materials
