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- The Top Is In?
The Top Is In?
BraVoCycles Newsletter
February 14, 2024
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Today we will be discussing...
Here is what we have been saying in our last three newsletters in the Market Summary section (with more details in the premium content) after weeks/months of supporting higher:
Thursday: “With one more pop-up on Friday, it is possible to complete the wave pattern and rollover.”
Sunday: “The market keeps grinding up despite many indications that a reversal is due. Specifically, technical indicators, sentiment, cycles, and most EW count alternatives suggest that a reversal is due soon.”
Monday: “Medium- and long-term technical, and cycles and EW counts discussed in the last several days in the premium content suggest it is time to reverse direction toward a spring cycle low.”
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Market Summary
The stock market delivered according to our expectations.
The bounce, i.e., retrace of the Mon-Tue drop, is possibly complete or could try a bit higher to fully close the gap from Tuesday.
My working assumption is for the market to go down into March, and there is a potential for a longer duration of the wave down. But we do not need to worry about that now; we will keep updating the forecast as we get more information.
Big Picture
We may have just seen a major top in SPX. A 100-year monthly SPX chart is shown below. Three things are notable:
Monthly RSI is strongly diverging;
SPX is flirted with the trendline connecting the 1987 and early 2000s lows and possibly being rejected by it;
Most importantly, the first two red circles correspond to the peaks preceding the two most significant bear markets in 100 years. Red circles denote times when 10% of the largest stocks corresponded to 75% of total market capitalization. The third circle is now.
Short Term
Major cash indexes such as SPX, NDX and DJI made a 5-wave impulsive moves down. In terms of Elliott Wave Theory, this suggests that after a partial retrace at least another 5 waves down are in play, if not more.
SPX also sliced through the levels I mentioned on Monday (5,000 and 4,970). So we got that initial indication of at least a short-term trend change.
Last night, I tweeted on X (https://twitter.com/BraVoCycles) that NQ (NDX futures might complete the bounce in the general 17,850-17,800 region. Specifically in the gray FLD (forward line of demarcation) band in the figure below. Indeed, NQ reached the gray band today and is in the resistance region and is between important 50% and 61.8% Fibonacci retracement levels.
Crossing the lower boundary of the FLD band, NQ generated a preliminary target for the 40D cycle to just below 18.5k. To confirm that cycle target, the 65-minute bar median will have to cross the upper boundary of the gray band. NQ could still push higher within the gray band without confirming the new 40D cycle target up to 18.5k. In my opinion, this is less likely, and I expect NQ to reverse down from here or from slightly higher, although “they” might try to keep indexes elevated until OPEX on Friday.
All major indexes retraced 61.8%, +/-, and are ready to make another drop lower, with or without pushing a bit higher first.
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