S&P 500 Update: Is This Rally Leg Over?
The September 5, 2016 Profit Radar Report published the chart below along with the following commentary:
“The chart below shows the long-term up side target purely based on projected symmetry. Based on the 1997 – 2013 trading range, the measured up side target is S&P 2,330 – 2,485, which is in the general vicinity of the 2,290 – 2,342 Fibonacci levels mentioned in the 2016 S&P 500 Forecast. Higher targets are possible, but we’ll reassess once we get there.”
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The second chart shows the trading activity over the past year along with short-term bars and trend lines we used to narrow down the up side target (the latest up side target was 2,494).
A special August 7 Profit Radar Report update featured this potent warning:
“The S&P 500 ETF (SPY) closed at a new all-time high at the lowest volume of the year. For the first time in a while, there is a bearish divergence between the S&P 500 and the NY Composite a/d lines. The ideal scenario (and tempting setup to go short) would be a spike to 2,495+ followed by an intraday reversal.”
This is almost exactly what happened. The S&P 500 spiked as high as 2,490.87 before falling 52 points.
However, this drop quickly caused an oversold condition.
A special August 10 Profit Radar Report update featured this chart and stated that:
“The CBOE equity putt call ratio (last chart) spiked to the highest reading (0.88) since April. The VIX is overbought. The VIX/VXV ratio jumped and contango fell. Both are near levels that have been seen at VIX highs. Stocks are oversold and ready to bounce. Based on the wave structure, we anticipate this bounce to be brief (2-6 days) and stay below the prior all-time highs (although the extent of the oversold condition would allow for a stronger bounce).”
The August 28, 2016 Profit Radar Report featured a bullish Elliott Wave Theory count with a projected up side target around S&P 2,500 (more details here: S&P 500 Update – Expect the Abnormal).
One of the images featured was a conceptual “We are here” chart (shown below). The green dots mark where we were in August 2016 (along with probability scores).
The red circles highlight where we are at today. The upcoming correction should be a choppy and frustrating wave 4 decline to be followed by another rally to new all-time highs. It then remains to be seen whether that high will be a major top or not.
Since the S&P did not quite reach our up side target, there is an alternate interpretation, which allows for continued gains almost immediately. However, that remains only an alternate unless the market tells us otherwise.
Continued analysis, with down side targets and buy/sell signals are provided via the Profit Radar Report.
Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.
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