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G4 Weekly Market Wrap, March 4th 2011

  • Written by Syndicated Publisher 44 Comments44 Comments Comments
    March 7, 2011

    Last weekend, in spite of technical indications to the contrary I suggested that the 19 day Conti cycle would be the bottom of the down cycle. It was a judgment call that I made at the time with the appropriate warning.  As the subsequent price action proved, this judgment was premature as (assuming that the bottom is now in) the bottom came 3 trading days later.  As this is within the +/- 3 day accuracy of the methodology it means that the 19 day cycle is still valid.  Note from the Conti chart below that the 36 day Conti cycle was spot on and the 65 day Conti cycle was only out by one day.

    As mentioned above, the Conti cycle chart is based on the assumption that the interim low for the XJO is now in position.  If the 19, 36 and 65 day Conti cycles remain valid then we should get interim market tops around the 16th March, 8th April and 18th May.

    At around midday today the price action of the XJO was on the way to the MBB currently located at 4875 (refer chart below).  Whilst the Line Oscillator indicator hadn’t cut yet, it certainly had turned which was not the case last week.  We would need a crossover of the LOI to confirm a buy signal.

    At 11:39am the 99 minute chart of the XJO clearly indicated that the descending trend line of the latest decline was broken to the upside. We can see that at the time this snap shot was taken of the index, it was on its way up to the 50% Fibonacci retrace level.  We can see that the 61.8% Fibonacci retrace level is close to the above mentioned MBB level of 4875 so this area may present a bit of a stumbling block to the trend.

    One of the dead weights on the progress of any rally on the overall index is the Financials excl LPTs Sector (XXJ). We can see from the chart below that whilst the price action has reached the LBB, the LOI has still not started to turn.

    The chart below of the S&P500 shows us that the US index is in a somewhat similar position to that of the XJO.  The price action on this index however has made it through the MBB and is on its way to the UBB located at 1344.54. Note also that the medium term ascending trend line has remained in play which is a positive sign for the index.

    As with the XJO, whilst the LOI has turned it has not yet done a crossover to give us a buy signal.  Until this is accomplished the bulls can’t get too excited.

    Summary

    Whilst we have not yet had clear buy signals from the LOI on both the S&P500 and XJO indices, there is more evidence this week than there was last week that an interim bottom has been put in place.  On this basis I would suggest that we look for potential tops in the markets at the Conti dates indicated in this Market Wrap.

    Please note that Randall has kindly offered to post the weekly Planetary Charts on his Incredible Charts thread on Saturday.  His thread can be found at the following address:

    http://forum.incrediblecharts.com/messages/427230/2618643.html


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