Current Position of the Market
S&P 500: Long-term trend – Bullish, but correcting within the long-term bull market trend.
Intermediate trend– A bearish correction has started which could retrace as low as 2200 before it is complete
Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of longer market trends.
Market technicians who follow iShares Russell 2000 (NYSE:IWM) are aware of its propensity for reversing its trend ahead of SPX and Dow Jones Industrial Average. This was particularly obvious at the last market top when IWM printed its final high price on 8/31, while SPX did so on 9/21, and DJIA on 10/03.
Last Friday, the major indexes re-tested their lows, but our leading index (IWM) closed the week at a new low. That is a warning that the decline of SPX which is already approaching one hundred points is most likely not over, although a brief bounce could take place before we go lower. The hourly indicators are just beginning to show some positive divergence, but it is not the kind of pattern that normally leads to a significant reversal. More work has to be done in the daily and hourly indicators before they are in a position to forecast an important low. And we are supposed to be in a bullish seasonal period which normally generates a Xmas rally! This year, it is going to come late and turn out to be a New Year’s rally.