S&P 500 – Page 3

Levels Recaptured. Now What?

October 28, 2014April 13, 2022

Back on October 17th, we found reasons for an immediate bottom (which turned out to be an accurate assessment). And on October 19th, we identified some levels in common indexes that would allow us to hold long positions. Those levels have been recaptured. Now what? Our head is on a swivel, identifying if/then scenarios in an incremental risk environment. There is still overhead resistance at downward trend lines off the highs from September. We’d like to see new highs made, and kept. Anything below the levels identified on the 19th, and we are out of our long positions. Yes, tomorrow is FOMC day. Don’t trade what you think the market should do. FOMC days are notoriously counter intuitive (what ever the market does tomorrow, be ready for the opposite to take place in the following days). Trade what you see. Price holds the final say.

Must stay above 1905 and make new highs.

Must stay above 16600 and make new highs.

Must stay above 1100 and make new highs. Right at downward resistance and Fib 62.8% — Must stay above 1100 and make new highs. Daily close at downward resistance and Fib 61.8%.

Dow Jones Industrials

Attention Slow Money (IRAs / 401ks) – Risk Ahead!

October 19, 2014April 13, 2022

Investing is all about risk management. Preventing loss is just as important as realizing gain. There are periods in the market where Return of Capital is the more appropriate approach than Return on Capital. Now is one of those times. Those retirement vehicles (401ks, IRAs, etc.) that have exposure to the US equity markets would be prudent to reduce that exposure at this time. You are an adult. You make your own decisions. You do not make investment decisions based on what you read here. You know the drill.

The last couple weeks have done some structural damage to the market. We identified the need to watch the S&P 500 closely back on October 8th. Those levels broke down and were a sign to look for lower prices. We got lower prices and even broke significant support at 1900 on the S&P (by the way, breaking significant support levels are a hallmark of a directionally shifting market – in this instance, from an up trending market to a down trending market). What did this breakdown mean? Something has changed. Specifically, the likelihood of lower prices ahead has increased. That means risk has increased. We don’t like to lose money if we don’t have to… So when the market tells us something has changed, we listen. You should too.

After a good deal of studying many markets and charts, I’ve identified some levels on three US major markets (Dow, S&P 500, and Russell 2000) that would need to be recaptured in order for any equity exposure to be increased or reestablished. Right now, the risk of loss is too high to consider hanging around to see what happens. If these levels are not recaptured soon, then lower prices are likely. If these levels are not recaptured, the best case scenario is sideways price action for a few weeks. One thing is for sure, the next few weeks have a high likelihood of volatility (large price swings), which is also a hallmark of trend change.

In summary, the current potential for reward it too low compared to the current exposure to downside risk. The body of evidence (including Intermarket behavior, cycles, internal breadth, seasonality) point to a dangerous week ahead. We even noticed that today marks the 27th anniversary of the 1987 stock market crash. Does that mean it will again this week? Absolutely not. But volatility and risk are upon us. Buyers beware. Risk ahead!

Here are our levels as annotated on the charts. Hopefully, we can recapture these levels and evaluate the next move. Be careful, curious investor.

10-19-2014 Important level on SPX — Need to recapture 1905

Cycles

Important Cycle Marking Major Market Top?

October 14, 2014April 13, 2022

One of the many tools at our disposal at 360 Investment Research is the use of cycles. What are cycles? Cycles are recurring events that happen at such a frequency as to be reliable in identifying the same event in the future. Think of the seasons of the year: Spring, Summer, Fall, Winter. These are cycles. They happen over and over again with reliability. We know with certainty approximately when these events will take place. Believe it or not, and I don’t have an explanation for it (other than ebb and flow of liquidity)… but markets also have cycles. One such cycle, the 360 trading day cycle, was introduced to me by Raj Ian Thijm on his site, http://timeandcycles.blogspot.com/. This cycle marks, with approximate reliability, turns in the S&P 500 every 360 trading days (which is also the equivalent of 525 calendar days or 75 weeks). See the chart below (you can click it to embiggen). The gray lines mark a distance of 360 trading days. Note how consistently this cycle marks significant turns in the market. What I also found interesting about this cycle is the possible significance of a cycle within a cycle. Look at the chart. See the green lines? This is the 360 trading day cycle on its 5th instance. Five 360 trading day cycles equal 1,800 trading days. Nice round number. But, that’s not the point. The point is that this 1,800 trading day cycle (a parent of the 360 trading day cycle) marked the relative tops of the S&P 500 back in 2000 and 2007. This same cycle has come due recently. Will it mark the top of the S&P 500 again? I don’t know, but I will be watching this carefully. The significance of the 360 trading day cycle is evident. Stay curious, investor.

Tag: S&P 500

Levels Recaptured. Now What?

Attention Slow Money (IRAs / 401ks) – Risk Ahead!

Important Cycle Marking Major Market Top?