Jack in the Box
A very Happy New Year to you all.
2019 begins with the market in recovery from the December meltdown.
After a quick look lower at the 2440s in a one day Sell Signal on 03 January, a renewed Buy Signal on 04 January at 2483 has now taken the market back up towards the important 2600 level.
The panic low on 24 December forms the center of a new T structure that has its first major projection on Monday 14 January. So far this is a simple high to low T structure drawn from the point where the selling started on 04 December to the price and oscillator low on 24 December. Time symmetry projects the series of upcoming highs from the low, and what happens after each high will then effect the new structure as it develops and matures.
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The T structure is confirmed when the declining cash-build up line (green line in the chart below) of the oscillator drawn at the declining oscillator highs is intersected by the oscillator moving upwards. This indicates graphically that buying pressure has overcome selling pressure and is confirmed by price. The price movement above the proprietary S/T channel creates an S/T Buy Signal.
As the oscillator moves upwards it activates further sections of the T structure potentially drawing power from previous declines, and so as the oscillator has now risen drammatically above its previous highs, it raises the possibility that the new structure is larger.
The first major projection is 14 January and so it would seem very likely that the market will experience some kind of pullback next week. If it does, then how deep will determine whether the T structure remains intact or whether it starts to morph or collapse into a more complex, perhaps bearish structure, like those previous ones.
There is plenty of room for a pullback in price without damaging the structure significantly, and price and oscillator currently look very strong. However, price much below 2550 and/or the oscillator back below zero would be the indication of another change in character.
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As mentioned in the last report, there was little in the way of 'support' below 2600, and once challenged the market opened up Pandora's Box of price discovery with a straight down move to 2350.
Zooming out to the weekly chart, we can see that price has now re-visited the targeted secondary support level at 2420 – site of the August 2017 low – and came close to the lower 2320 level – the site of the April 2017 low.
One of the things that I have discussed previously is that when the market pushes upwards through a major trend line as it did in June 2014 and September 2017, we have a challenge to price. The price rise eventually becomes unsustainable and price needs to correct and re-establish itself through a process of probing back lower to find out where the value in price lies. Re-visiting these lows was always a possibility especially after the unrestrained advance in late 2017.
For now, it seems that the market has re-established that value in price lies at 2350. We may of course need to re-visit that level again, as we did with the primary support level at 2600. We shall have to wait and see.
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It is interesting to look at the much larger time frame occasionally, and on the monthly chart below we can contextualise the market in relation to its historical lows in 2002 and 2009.
It is clear that the market had been rising generally since the low in March 2009, and therefore within the right-hand side of a Mega T structure. According to this we have seen a projected high from the April 2000 peak in January-February 2018 (pink), and subsequently another projected high from the July 1999 high (red) in October 2018. This was potentially the momentum peak of the Mega large T structure. Another wave from the July 1998 high would project another major high in October 2019 – not necessarily a higher high though, but it could be.
I have drawn each projection from the price highs prior to the major low that are above that low . In the red T structure at the 2002 low we can see that the ultimate projection for the 2007 high came from the 1997 high which is of course much earlier than the final high in that bull market. Using the same logic for the current mega T we should keep an eye on the projections from the earlier highs. These are October 2019, August 2020, and January 2021.
As you can see the market is generally supported at its 10 month exponential moving average (ema) during bullish phases and subsequently at its 21 ema on major pullbacks. If the market is to enter a serious Bear Market it must then continue to decline below the 21 ema – which is what occurred in December. The market is now coming back up towards the 21 ema. Note also that the long-range 8 / 55 oscillator also provides a confirmation of the change in momentum.
The low on 24 December coincided with the lower monthly bollinger band at about 2350 and that was previously temporary support during December 2000, March 2008, and February 2016. With the recovery bounce underway we should be mindful that the monthly 10 and 21 emas may now be strong resistance IF the Bear Market is to continue.
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All in all, 2019 should bring with it some excellent opportunity with an expected range like 2018 – far beyond the experience of recent years. We should expect price volatility to continue and trade accordingly. This is a Brave New World.
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Regardless of whether the market can continue to recover or whether deeper low(s) are ahead of us, the simplicity of the proprietary price based S/T Signalling System continues to keep us on the correct side of the market, providing a timely Buy signal in early January.
If you would like to learn more about using the S/T Signalling System please get in touch.
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Be prepared for what is coming next and trade with confidence:
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