SPX: Q3 Wrap-Up & Outlook For Q4 2022

* See UPDATE below...

Further to my posts of September 30 and September 24, the following will summarize SPX market action for the month of September, Q3 and year-to-date.

Please refer to the following three charts...namely, the yearly, quarterly and monthly timeframes for the SPX.

YEARLY TIMEFRAME:

A bearish engulfing candle has formed, so far, this year on the yearly chart, and it has a range of 1,234.49 points...the second largest on record, after the 2020 range. It closed at a new low in 2022 and well below its yearly pivot point of 3996.12.

The SPX:VIX ratio, shown at the bottom of the chart in histogram form, is sitting just above an important major support level of 100.00, and has fallen below both 5 and 20-year MAs...depicting extreme bearishness on this timeframe.

SPX Yearly Chart

QUARTERLY TIMEFRAME:

Note the long upper spike on the Q3 candle, where it faked a bullish reversal, before falling to a new quarterly low close for 2022...and well below its quarterly pivot point of 3831.68.

The SPX:VIX ratio, shown at the bottom of the chart in histogram form, is sitting just above an important major support level of 100.00, and has fallen well below both 5 and 20-quarter MAs (which are about to form another bearish crossover)...depicting extreme bearishness on this timeframe.

SPX Quarterly Chart

MONTHLY TIMEFRAME:

Note the long upper spike on the September candle, where it faked a bullish reversal, before plunging and closing at a new low for 2022...and well below its monthly pivot point of 3763.01.

The SPX:VIX ratio, shown at the bottom of the chart in histogram form, is sitting just above an important major support level of 100.00, and has fallen well below both 5 and 20-monthly MAs (which formed another bearish crossover in April)...depicting extreme bearishness on this timeframe.

SPX Monthly Chart

PIVOT POINTS FOR OCTOBER:

The following Pivot Point Calculator depicts the Pivot Point, 3 Resistance Levels, and 3 Support Levels for the month of October (taken from the data of the September candle)...which are possible upside and downside targets.

Note that the S2 target is in line with the first major support level of 3200, mentioned in my post of September 30, while S3 sits just above the next major support level of 2800, also mentioned therein.

Investing.com Pivot Point Calculator

(via Strawberry Blonde's Market Summary)

CONCLUSIONS:

1. As I mentioned in my post of September 30, until we see the SPX:VIX ratio fall to somewhere around 80.00, or more likely 60.00, I don't think we're close to an equity capitulation, yet.
2. Furthermore, and, as I concluded in my post of September 24, all in all, I see no pivot away from U.S. Dollar strength and global equity and sector (and Bitcoin) weakness...YET.
3. So, for the moment, U.S. cash is king, as the U.S. Fed has signalled its intent to continue raising interest rates and keep them elevated for some time after inflation has declined to the Fed's 2% maximum inflation target...which could last well into 2025.
4. As an aside, my 2021 Market Wrap-Up and 2022 Forecast (written on January 1) has been fairly accurate, to date. By the way, the S2 target for the 2022 timeframe (calculated from the 2021 candle) is close to 3200 (and the Pivot Point from the 2020 candle sits at 3236.04), while the S3 target is close to 2800...both of which are likely targets, either for October, or sometime this year...especially 3200, where there is a confluence of a variety of Pivot Point targets, as well as (first) major price support. Here are several excerpts from that post, as well as my last update therein...

Finally, until President Biden drastically changes course from his 'Big Government Tax & Spend' agenda, and unleashes the oil and gas industry by dropping his overly-restrictive and punitive regulations, trade with caution, as I expect high volatility and large intraday swings to continue!

* UPDATE Oct. 10...

If JP Morgan CEO Jamie Dimon's projection is correct, a further 20% drop on the SPX (from 3600) would send it down to around 2880...and in line with the S3 target mentioned above...or 2800 on a downside overshoot.

While it may not hit that level this month, 2800 is a major price support level shown in my article of September 30...and a possible eventual target.

SPX Monthly (intraday price October 10)

Source: ZeroHedge

World Market Money Flow: Outlook for 2019 Q4

My goal in writing this article was to keep it as simple as possible -- not an easy task for me as I'd love to delve deep into the minutiae of analyzing a whole slew of my charts, data, and information I've assembled over months and, even years -- but, for your sake and the sake of reaching a coherent conclusion and forecast for the fourth quarter of 2019, I've had to, considerably, whittle down my presentation. So, while looking through my superpower lenses, here goes...

When I wrote my post of August 6, 2018, the SPX was trading at 2840.35. I had projected either a push higher towards 2900, or even 3033, or a pullback to its first Fibonacci Speed Resistance Fanline support around the 2400 level. Also contained in that post, were a couple of technical gauges to monitor strength/weakness and trend.

Since then, the SPX:

• continued a tepid, choppy rally, to exceed its first target (2900) and hit a high of 2940.91 on September 21
• eventually reversed course to exceed its second target (2400) and hit a low of 2346.58 on December 26
• abruptly reversed course and rallied towards its third target (3033) to hit a new all-time high of 3027.98 on July 26, 2019...just 5.02 points shy...for a gain of 20.7% from January 1 (28.7% from December 26)

Overlayed on the following monthly chart of the SPX is the same Fib SR Fanline drawing.

The current price on the SPX reflects last Friday's close...just one day short of the last trading day of September and Q3 of 2019.

At the moment, near-term resistance lies at 3033 (target 3). Near-term first support sits at 2800 (price and trendline support), with second support at 2550 (price and fanline support).

Longer-term resistance is at 3233 (fanline resistance) (and, potentially achievable by year-end, or sooner), while longer-term support rests at 2400 (major price support). Exactly what catalyst would drive price to either extreme is yet to be revealed.

Instead, we may see price continue to whipsaw erratically between 3033 (or maybe a bit higher) and 2800 or 2550 for Q4.

To try and keep things simple in terms of possibly gauging strength/weakness and direction, I'd suggest monitoring three basic technical indicators on this longer-term timeframe...namely, the RSI, MACD and STOCH.

In this regard, both the MACD and STOCH have recently formed bullish crossovers and the RSI is trading above the 50 level. If those hold and continue to rise, they will support higher prices. 

However, a reversal of those indicators may signal that traders were satisfied with their gain of 20.7% (from January 1 to July 26) -- that target 3 had, essentially, been achieved -- and will be taking some profits as they, possibly, seek profits (or safety) in other markets until year end.

If we see either scenario begin to emerge whereby new SPX highs are made or old lows retested, one tool that may be used to gauge directional sustainability to year end is the velocity and degree to which money flows into or out of the SPX versus: 

• the World Index excluding USA
• the US dollar
• 30-Year US Bonds
• Gold Futures

...shown on the 1-year daily charts below.

For example, the following graphs show percentages gained/lost over four timelines, namely, year-to-date, Q3, the month of September, and the past week, respectively.

Investors have:

• hedged risk in the SPX with Gold & Bonds on a year-to-date basis
• more heavily favoured Gold, Bonds, & US$ during Q3
• taken a tepid interest in other world markets during September
• renewed their interest in Bonds & US$ during the past week, while taking some profits in Gold, SPX & other world markets

If we see continued interest in Gold, Bonds, & US$ going forward on an accelerated percentage-gained basis, I'd predict that selling will continue and accelerate in the SPX and other world markets. However, we may need to see some sort of catalyst occur to move them substantially, and to potentially an extreme level, in either direction.

In the short term, that can be monitored on a week-by-week basis (fourth graph), until each of the next three months of Q4 are complete.

* UPDATE December 29...

The SPX managed to hit my Q4 target of 3233 by the end of the year, as I outlined in my post of December 29.

And, so, as I asked in my post of December 24 [one-day $34.4 Bilion U.S. retail sales and $17 Trillion global market gains (21.68%) this year], "What's not to like, Joe?"

Happy New Year!

January 2018 Market Wrap-Up

* See UPDATE below...

We could see a tepid recovery of yesterday's "shock drop" in equities (as I described here), until the Fed's next interest rate hike (possibly in March), to send Major Indices to levels somewhat higher than their recent all-time highs. But, we'll likely see higher volatility remain in play and, possibly, more wild price swings, until then.

As I promised in that post, here's January's month-end summary.

DOW 30 INDEX

The first daily chart shows that the Dow 30 Index failed to fill yesterday's gap down and closed 100 points above its low of the day.

Momentum remains above the zero level, but has dropped dramatically after failing to rise to a new high when the Dow made its last new high on January 26. It's an important level to hold in support of such a recovery. Otherwise, a drop and hold below zero would see further weakness in the Dow.

S&P 500 INDEX

The next daily chart shows that the S&P 500 Index failed to fill yesterday's gap down and closed off its low of the day. The VIX is overlayed on this chart and price remains above near-term support of 13.00.

Momentum remains above the zero level, but has dropped dramatically after failing to rise to a new high when the SPX made its last new high on January 26. It's an important level to hold in support of such a recovery. Otherwise, a drop and hold below zero would see further weakness in the SPX.

It's Now or Never For Bulls

Was today's (Friday's) world-market rally serious and sustainable, or simply a knee-jerk reaction to Japan's surprise NIRP (negative interest rate policy) announcement last night (including some shorter-term short-covering action) and "end-of-month window dressing" by fund managers?

Perhaps the following update to my last post will provide some further insight into that question, as I review a variety of markets.

SPX Candle Review of the First Half of 2015

Q2 of 2015 closed today (Tuesday, June 30th). The following describes candle action, to date, in four timeframes -- namely, Yearly, Quarterly, Monthly, and Weekly timeframes.

Each candle shown on the following chart of the SPX represents One Year.

The first half of this year is depicted by a "doji," as of the close on June 30th -- spelling "indecision" by this equity market. So far, the close is a mere 4.21 points higher than its open on January 2nd...not much of a gain in six months...no surprise, since price has been held back by the 161.8% External Fibonacci Retracement level (taken from the last major swing high in 2007 to the 2009 low), which is a typical major Fibonacci profit-taking level.

Each candle on this next chart of the SPX represents One Quarter of One Year.

Q1 of this year is depicted by a "spinning top" -- spelling "indecision" by this equity market. Q2 of this year is depicted by a "shooting star" with a slightly lower close than Q1 -- spelling a rejection of higher prices and a "bearish tilt" to this market.

FURTHER OBSERVATIONS...

Momentum has declined since 2014 on both charts -- confirming the lack of bullish confidence and commitment in this index. Candle action on both charts shows that major profit-taking has occurred in a considerable number of stocks in this index, so far, this year. In order to confirm that bears have taken firm control of this index going into Q4 of this year, we'll need to see a lower close on the Q3 candle (which begins tomorrow) on September 30th.

DRILLING DOWN...

However, looking at two shorter time frames:

• because of June's "bearish engulfing" candle, we'll need to see a lower close for the upcoming July candle on the following Monthly chart to signal further medium-term bear strength going into August, and
• because of last week's "bear harami" candle and a lower price below that close, so far, this week, we'll need to see a lower close by the end of this week on the following Weekly chart to confirm further short-term bear strength going into next week.

So, I'd watch for lower lows on this week's candle with a lower close on Friday, and, then, a lower low on July's candle with a lower close on July 31st -- also, a drop and hold of the Momentum indicator below the zero level on both charts (it has already dropped below zero on the Weekly timeframe) -- to warn of bearish control of this index going into August.

Stay Buckled Up...More Volatility Ahead as July Closes!

My last post on the SPX:VIX ratio refers. I mentioned that price on the Weekly ratio chart below may retest the 130.00 level and then rally. On Thursday of this week, price not only retested 130.00, but it blew right below to close around the 110.00 major support level.

Momentum has dropped below the zero level, indicating further weakness may be ahead.

The Monthly chart below of the SPX:VIX ratio shows that a massive outside bearish engulfing candle has now formed on the July candle (to close out this month) and that Momentum has also dropped below zero on this timeframe...also signalling we may see further weakness ahead.

The question is whether we see weakness continue and accelerate on Friday and next week, or whether we see price fluctuate wildly to consolidate or bounce and resume its upward trek for awhile before a potential next leg down.

The following Daily chart of the SPX:VIX ratio shows that Momentum has dropped to a very low level on this timeframe, which has typically been followed by some kind of consolidation or bounce...one to watch in the days ahead for possible clues on market direction and conviction.

Price action on the Dow 30 has seen a break below both a 60% Fibonacci fanline and rising channel from the 2013 breakout, as shown on the Daily chart below.

Price on the SPX has dropped to the 50% Fibonacci fanline and bottom of the rising channel from the 2013 breakout, as shown on the following Daily chart.

Price on the RUT has dropped below the 60% Fibonacci fanline and and well below the bottom of the rising channel from the 2013 breakout, as shown on the following Daily Chart.

Failure of the Dow and RUT to reclaim their respective channels, and failure of the SPX to remain within its channel will likely see further weakness develop in these three Major Indices...stay tuned for further intraday volatile price swings either way!