Market Timing and Price Projections: Intraweek Update

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Table of Contents

• Stock Market Review

  • Rug Pulled Out of the Blue? Not Really!

  • Technical Picture

  • Sentiment

  • Cycles

  • Elliot Waves Status of Major Indexes

  • Conclusion

• Cycles Update

• Major Indexes- Cycle Price Projections and EW Coun …

• VIX Update

Stock Market Review

Rug Pulled Out of the Blue? Not Really!

Most investors and traders were shocked by the rug pull in major indexes yesterday. Not our group, hopefully. I have been warning for a few days about potential risks for longs because the stock market has been running on fumes recently and the game plan should be to sell the rips (STRs) and raise cash. But expect a bounce for a few days. Most indexes should attempt another higher high, but not guaranteed, before starting the January-February correction I have been mentioning.

Technical Picture

• The market got oversold quickly with a sharp selloff yesterday and is due for a bounce of a couple of days, or slightly longer;

• Most technical indicators on the daily and weekly charts exhibit negative divergences, i.e. a negative technical picture  negative for the market. We showed in the last few reports extreme negative divergences in technical indicators:

• The Money Flow Index (MFI) vs SPX, exhibiting a significant negative divergence  expect a correction;

• SPX/VIX ratio is at historic highs. Extremes in this ratio usually precede significant corrections but could be early by several days/weeks;

• NYSE Volume Advance/Decline line is negatively diverging relative to SPX, despite a powerful rally in the broad Russell 2000 index  expect a correction;

• The below figure shows a negative divergence of the McClellan Oscillator (MCO) relative to SPX  expect a correction;

Sentiment

• Most sentiment indicators such as AAII sentiment, CNN Fear & Greed Index, and Intermediate-term OPTIX, that we have reviewed recently, are in extreme overconfidence region, which signals a caution flag for traders and investors;

• The figure below shows the Smart Money and Dumb Money sentiment and suggests a correction soon;

• Note that the sentiment indicators are not short-term timing signals but rather descriptive of the state of the market. However when in the extreme territory one could take a contrarian stance, in a proper context. They should be used in conjunctions with other methods such as technical analysis EW theory and cycles;

Cycles

• As mentioned in the last two reports we had some shorter cycles peaking this week which resulted in the sharp reversal yesterday;

• he nominal 20W (N20W) cycle has still a few days before potentially topping and could peak simultaneously with the N10D cycle which just turned up;

• Major indexes reached the N20W cycle projections but they could still move higher within the target ranges;

• The figure below shows the weekly cycle composite projection of one of the most important stocks, AAPL. As they say, as Apple goes the market goes, and cycle projections for AAPL also suggest a 2-2.5 months correction starting in January, similar as for market indexes.

Elliot Waves Status of Major Indexes

• Elliott Wave (EW) counts of most major indexes, as analyzed in our premium content section of the newsletter, ideally require another higher high;

• But sometimes things are not ideal at significant tops and bottoms, e.g. another sudden rug pull reversal may cause a truncation of the last wave in the EW structure.

Conclusion

Based on the considerations above, and analysis in our premium content section of the newsletter, one could expect some further minor upside in most major indexes but expect a correction into late February or early March 2024.

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