Trader's Tips Stock Market Newsletter

Published September 02, 2007 ...by oextradingresources.com
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Stock Market

After the S&P 500 Monthly tested the March 2000 high in July, a pullback brought prices down for a test of channel support in August but the market recovered and closed on the positive side, near the month high, thus forming a bullish reversal bar for the August trading month. So any violation of the Aug. high at 1503.89 would signal even higher prices ahead and possibly a test of the July high.

monthly chart


The OEX Monthly clearly broke channel support intra-month but managed to close within the channel, forming a Hammer looking candlestick. This setup at channel support, with Weekly Cycle10 at the same time in the early stages of an upside pressure phase, looks bullish to me. So a break of the Aug. high at 700.09 could mean a test of the July high is coming. The late month recovery probably prevented MACD from turning bearish, so the bullish mode from Jan. 2006 is still barely intact.

Near term, in the August issue of Trader's Tips it was suggested that only the first wave a of an a-b-c zig-zag Elliott Wave pattern was underway to the downside. Now in September, a three wave looking pattern has already completed in the OEX Daily Chart with the OEX once again climbing higher.

At the point it reached the key L3 DGL (Dynamic Gann Level) support zone in mid August, RSI 25 dipped below 40, once again warning about a significant market bottom possibly forming. For new subscribers, in this RSI 25 & Market Timing Article i elaborate on why this special setting helps in identifying more important market tops and bottoms.

Volume Analysis
A higher market is also supported by the S&P 500 mid term Volume Chart with the SBV oscillator gaining ground from early August. A move above the 20% level and then a reversal below it, would indicate selling pressure as the next likely event for this market.

volume chart
Chart courtesy of marketvolume.com



The next calculated Gann Angle cycle convergence is coming up Sept. 24 and is given the usual 1 day leeway on both sides of this date. This GA marks 135 trading days from the March 2007 low and less important... 45 days from the July high. I've seen more powerful GA's but it's impact may cause a near term reversal.

A recent S&P 500 COT Report (Commitment of Traders) as of 08/28, shows that commercial future traders are net Long, with roughly 24,000 contracts. With "Smart Money" in positive territory, this should be positive for the market as well.

As for the popular individual stock, Google tested channel support in August, which was strong enough to force a reversal in this stock. With Cycle10 now just entered bullish mode, it bodes well for Google in the coming weeks. Any break of the Pivot high at 526.82, would indicate a test of the July high thereafter.

More chart updates:
AG's current preferred Elliott Wave count - Daily Chart
Breadth
Gann Angles Weekly


Cycles

WCA Model
The WCA Model Proper as of 08/31. The WCA Model (courtesy of wcamodel.com) is an original cyclical method for predicting the US Stock Market. Using the ZigZag Diagram technique, an updated (July, 2007) hypothetical track record showed a 1945% compounded profit since Jan. 2000. Initial capital $20,000 - as of July 12, 2007: $409,013 ( Profit Graph )


Bradley Indicator
For new subscribers, a brief intro to the Bradley, excerpt from the Outlook Report:
..."The Bradley Siderograph is a popular indicator many traders rely on, to get an overview of possible larger turning points in an upcoming trading year. It is known for it's inversions, so it's not so good in showing whether highs or lows are coming but more so ... when major highs and lows can be expected. So using other indicators in combination with the Bradley could give useful clues about larger tops and bottoms."...

Bradley dates indicating market turning points in 2007:

  • October 17
  • December 22

    bradley

    Chart courtesy of amanita.at




    Artificial Intelligence (Neural Networks) is another helpful tool in finding potential tops and bottoms. Here is the current output to Oct. 2007. Inversions can also occur in neural network patterns, so it should be used in combination with other indicators.



    Sentiment

    Investors Intelligence
    As of 08/28, the II Bull/Bear Ratio is at 1.11, a 0.60 reading is considered a bearish sentiment extreme.




    Chart courtesy of market-harmonics.com


    Bullish Percent
    The BPI (Bullish Percent Index) reached oversold readings in mid August, correctly indicating a market bottom, as we know what happened to the market thereafter.


    Chart courtesy of stockcharts.com



    Forex
    After completing a five wave structure in July, daily EUR/USD rates broke out from a Rising Wedge looking pattern in August and has just made a snap-back move towards this broken wedge line, a typical reaction seen after such breakouts, before possibly resuming it's overall new trend lower. In addition, Cycle10 holds on to it's bearish mode, despite this snap-back move higher. An entry into the wedge again, would negate this scenario.

    See Forex TV online now...


    US Economic & Fundamental Condition


    Consumer Confidence
    As of 08/28, CC is at 105, - 6.9
    CC is probably going for a test of important trendline support in the 102 area, after falling through minor trendline support in August.

    Consumers represent two-thirds of all domestic spending in the United States. So measuring consumer opinions is an important part in gauging future consumer spending and in turn the economic condition. High Consumer Confidence holds up the economy.

    consumer confidence

    Chart courtesy of market-harmonics.com



    Yields
    The TYX is deteriorating and a test of trendline support in the 4.75 area is not out of the question, if the minor trendline it closed at for the week, fails to hold.

    USD
    A Double Bottom and a bullish RSI 25 divergence is still observed on the monthly USD Index chart, with the addition of a Doji reversal candlestick formed in August. A mid & long term bullish USD breakout, is in line with the bearish outlook for the EUR/USD pair, which broke out from a Rising Wedge pattern in August (see Forex section above).

    Real Estate
    The Real Estate market as reflected by the Dow Jones REIT index, has established a bearish trendline, after it fell through it's 50 EMA support this summer. As long as this trendline resistance remains intact, (closing basis) the short & mid term outlook is bearish for this market.

    OIL
    July's Hammer candlestick up against trendline resistance, correctly warned about weakness coming, as the XOI tested trendline support intra-month August but recovered and closed near the month high, which often is a sign of strength ahead. Overall, a larger Wedge pattern developing, is still not out of the question. Any monthly close below wedge support, could lead to long term weakness for this market and lower gas prices, as a likely positive result.

    Gold
    Any weekly close above the XAU, Gold & Silver Stock Index trendline it closed up against this week, would signal further advance towards a larger trendline coming in at around 157.

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    Regards,
    -AM
    info@oextradingresources.com
    http://oextradingresources.com

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