S&P 500 Breaks 1,875 Support
The broad market breakdown is indeed well-underway. Stocks across the board are grossly overvalued – but very few market participants recognize it. Equities are in a bear market, folks. The best money going forward for investors and traders will be on the short side in the months ahead.
What is noteworthy from a technical standpoint is the price action in the vicinity of the 1,875 level basis the S&P 500 cash index. 1,875 is a very important threshold value for two reasons: one, it is a major price octave; and two, it is the support line that held the August/September breakdown in that index. This floor of support – now broken – will act as overhead resistance.
With the lone exception of the Dow Jones Industrials, all of the components among the Big Five (DJIA, DJTA, S&P 500, New York Composite, NASDAQ Composite) have now broken below their respective August/September lows. The 15,625 price octave for the DJIA held support at the August 25, 2015 and January 20, 2016 bottoms. The 15,625 level will continue to act as a repelling magnet until decisively broken – and that day is coming soon. The broad market should continue to remain vulnerable to technical selling pressures into the next 39.8 trading day cycle low which, by my calculations, is due in the March 4th time period (+/- 3 trading days). I would not be surprised to see the 1,750 level for the S&P 500 tagged at that March 4th low. 1,750 is the next price octave below the 1,875 marker. Looking further down the road, I still expect a 33 week primary cycle bottom in the vicinity of May 10th. I anticipate the S&P 500 will then be back down in the 1,500 area.
39.8 Trading Day (TD) Cycles
Long-term readers are well-acquainted with my theories regarding trading cycles and their underlying mathematics. The 39.8 / 79.6 trading day (TD) cycle series govern the patterns on the daily charts of the stock market. As can be seen, the 39.8 TD cycle undergoes various degrees of expansion and contraction. At the short end, this cycle contracts to 0.618 of its 39.8 TD value – 24.6 TDs. At the long end, the cycle can expand by a factor of 1.618 to 64.4 TDs. Over the long-term, though, the average of the data falls right at 39.8 TDs.
Each 39.8 TD cycle is normally composed of two subcycles which I refer to as alpha (A) and bravo (B). Sometimes these subcycles are easily discernible, sometimes they are not. They tend to be separated by Fibonacci ratios of either 0.382/0.618 or 0.447/0.553. My Fibonacci analysis of the recent patterns points to the March 4th time period (+/-) as the next likely 39.8 TD low point – afterwards, May 10, 2016 – which should also coincide with a standout 33 week primary cycle bottom.
79.6 – 98.4 Month Cycles
The monthly S&P 500 chart above reflects major market peaks occurring at roughly seven year intervals (84.3 months). The rhythm has waxed and waned between 99 months at the extreme to a minimum of 76 months. These monthly time spans have their root derivation in the Fibonacci series and are governed by the equations depicted above. The average over the long haul is right at 84.3 months (Fibonacci 377 / √5) X 0.5) – roughly seven years. The latest peak in May of 2015 occurred 91 months – about 7 ½ years – from the October 2007 peak.
5,000 has proven to be terminal resistance for the NASDAQ Composite. The 5,000 line marker marks a double top for the NAZ which is likely to last for quite some time.
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