Pullback or Not?

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• Headline and core Consumer Price Index (CPI) data, released early on Wednesday, each rose 0.2% month over month. Both readings matched average expectations on Wall Street. Annual inflation in July eased from June to 2.9% from 3%, the first time under 3% in more than three years, and below expectations. Most of the annual gain reflected stubborn housing inflation.

• FED’s Power to set the table for the September rate cut at Jackson Hole – but jobs data will determine the size.

• Stocks rally again as signs of a crash evaporate.

• Dow rallies as the latest economic data provide a pushback to recession fears.

• S&P500 has now erased its entire August decline.

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SPY – A Deeper Dive

• The chart below is one type of analysis that we offer present in the premium content. It shows that SPY satisfied the 20W cycle target, corresponding to 48.4-55.3 trading days offset for the forward line of demarcation (FLD). Please read in the educational content on the website how to interpret the FLD based price projections.

• Normally, when a target is satisfied, the price should pull back in some form.

• However, SPY also generated a target to a new high for the 20D cycle, as shown in the second chart below.

• The chart below is the 4-hour technical chart with more details as of 11:30 am on 15 Aug.

• SPY has been jumping above resistances without much pullback. Today, it jumped over the pink trendline and 50D MA.

• It is now at a convenient level to pull back: 1) hitting 78.6% retrace fib (red) of the drop from mid-July, 2) hitting 161.8% expansion (green) fib, and 3) has resistance not much above the present price level (gray horizontal lines).

• It faces multiple resistances.

• Black and green counts are plausible. 

• It is practically the last chance for black ((b)) to complete.

• Though the green count can be given preference by about 70:30, considering the outstanding target to new highs.

• As mentioned earlier, it fully satisfied the 20W cycle target. However, it should normally pull back some even if it intends to pursue the higher 20D cycle target to a new high.

• Will SPY oblige and pull back? 

• It does not have to if it has other plans, but normally, it should.

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Follow BraVoCycles on X

• Consider following my posts on X (former Twitter), as I often post timely charts in between newsletters. My X posts complement the posts in the newsletter. Yesterday I posted a premium content chart, shown below.

Market Summary

Market Data

As of 2:30 pm on 15 August 2024.

What Has Been

• On Wednesday, a tame CPI on Wednesday did not produce a significant reaction in the US market. US indexes mostly moved sideways to up.

• The Asian markets were mixed, while the US and European markets were mostly green. 

• Dow advanced 242.75 points or 0.61% to 40,008.39. 

• S&P 500 advanced 20.78 points or 0.38% to 5,455.21. 

• Nasdaq advanced 4.99 points or 0.03% to 17,192.6. 

• Russell 2000 declined 10.87 points or -0.52% to 2,084.32.

• However, on Thursday, surprisingly strong retail sales data are sending stocks up despite rising yields. Rate cut odds next month remain strong.

• Before Noon on Thursday, the US indexes are nicely up, between about 1%-2%.

What is Next

• The market is in a “to be or not to be” situation right here regarding completing the ((b)) wave very soon versus going to a new high.

• Ideally, in either case, the market should pull back for a few days before another swing higher. 

• There are good arguments for more upside but not a uniform message across all indexes yet.

• The volatility analysis plus consecutive generation of higher and higher cycle targets kept the bearish speculations in check.

• Although I expected a strong rebound on Monday a week ago, I did not expect it to evolve into a bullish wave pattern, which is now one of the two options.

• We cannot preclude a new high in the short term, but my long-term view is still bearish, based on much evidence I posted over the last 2-3 months, despite this ferocious rebound in indexes. Both count options suggest lower with or without new highs first.

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