There are two problems for our species' survival – nuclear war and environmental catastrophe – and we're hurtling towards them. Knowingly.
– Noam Chomsky
Time for an update on the S&P 500.
In my last report I posed the question – was it time to rollover and die, or was it time for a summer rally? The answer came quickly and on 12 July the market gapped up above descending resistance on a clear Buy signal.
A good summer rally was had, and after several momentum and breadth warnings we had the exhaustion move to 2492 on the 8 August. I had been warning my readers of an expected peak in the early August timeframe but then someone mentioned missiles and we had the quick panic selloff last week.
As you can see several of the recent T structures pointed to a possible August peak including the very large Double Bottom structure centred inbetween the 2 major lows of early 2016. (Top in purple)
The panic took the market straight down to the important 55 day exponential moving average, and this is an important inflection point and has been the site of many important recent lows.
The subsequent bounce has made a small T which looks to be confirmed today and projects a high in late August.
Interestingly the 2nd low of the large Double Bottom T structure projects a series of Echo lows (marked in pale blue) and, if correct, this suggests another important low coming up also in the late August timeframe.
The weekly chart above shows the full potential range of the long range Double Bottom structure of early 2016. It now looks nearly complete. As you can see the market has been tackling the long term resistance lines that I have drawn from the March and September 2000 tops. I believe that because the market has moved upwards through these lines it has set up a significant move higher. I suspect that it may be similar to the June 2014 breakthrough, which wasn't straight up but followed a process of re-testing the previous significant low and building a platform. Perhaps 2350 and/or 2320-30 will become significant at future lows prior to the next major advance?
In the meantime it looks like the next important peak will be in the week of 25 August, with perhaps another significant peak in the week of 22 September. How much of a pullback is required first, and whether to expect higher or lower highs is unclear, and is dependent upon what happens next.
Beyond this it seems likely that we will need to see some type of corrective action that should set up another large T structure. Notice the momentum slowing on the oscillator has previously led to some significant corrections.
Perhaps Trump vs Kim after all.
Be prepared for what is coming next:
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