Time for an update on the S&P 500.
In my last report, I mused upon the question: is it about to get unpleasant, as the market squeezed, gently, downwards.
I pointed out that the next Echo low projected by the extremely long range T structure associated with the early 2016 double bottom was expected to be around the 19 – 22 April.
At the time the market was triangulating and displaying bullish divergence in the oscillator, whilst at the same time respecting the defined downward trend channel.
Prior to the recent French Election, the market displayed volatility warnings not disimilar to those prior to Brexit and the US Election.
A few votes later and we have a huge volatility crush and markets open up well above the previously defined channel. Markets held firm and quickly rallied above the initial pop and headed for the 2400 level.
The result:
An S/T (short term) Buy Signal and a strong move of the (Magic) T Volume oscillator up through the long cash build up line marked in green.
This in turn produces a new large T structure drawing power from the cash-build up line and projecting strength forward in time equal to the amount of time that the market has been declining (as described by the oscillator). Each wave down in the oscillator has the potential for producing a wave upwards equal in time.
Arms of this new T structure project forward into May and potentially into June.
The caveat:
With such a rapid move back towards the 2400 level, there is always the possibility of failure, and it is true that the market has recently been in a mode of selling the strength and buying weakness. It is entirely possible that we see a short-term double top, and a pullback here. If this occurs, it will require a new low in price and oscillator to significantly change the bullish outlook.
Zooming out to my weekly chart, the super large T structure centred on the early 2016 double bottom still seems alive and well. There isn't an obvious projection for another major peak until the week of 09 June, as the T structure still seems to be drawing power from the mid 2014 declines – from prices above those of the 2016 lows.
However we should acknowledge the strong 'resistance' apparent at the current highs due to the long term gann projections from the 2000 March and September tops. Movement above these levels will open up the possibility of considerably higher prices.
The market reveals its intentions one day at a time and reserves the right to change its mind on a moments notice.
We watch the oscillator for clues, but we use price as the leading indicator.
Be prepared for what is coming next.
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