Market Report 28 September 2014

Market Report  28 September 2014

 

At the time of my last report on 31 August, the Dow stood at 17098. It has edged higher and is now at 17113. The bigger picture still looks absolutely fine as you can see here:

 

http://stockcharts.com/def/servlet/SC.pnf?chart=$INDU,PMUBDANCBO[P][D20140927][F1!3!100.0!!2!20]&pref=G

 

However, the last week has seen quite a bit of volatility with the completion of a very small H&S top area. The top is so small it doesn’t even show up on the P&F chart, so it certainly has no impact on the bigger picture. We could see a few hundred points of downside, but after that the bull market should reassert itself and ultimately I’m sticking to my very long-term forecast of 20000.

 

The S&P500 is currently at 1982 compared with 2003 four weeks ago. It remains remarkably consistent – one of the most consistent charts I have ever seen. I did say a few months ago that I thought the 2000 level might be a bit of psychological resistance, and that seems to be proving correct. As you can see from the chart though, there is nothing whatsover to indicate any change of trend:

 

http://stockcharts.com/def/servlet/SC.pnf?chart=$SPX,PMUBDANCBO[P][D20140927][F1!3!10.0!!2!20]&pref=G

 

If we reduce the box size by half to show more detail, you can see how the recent price action is a slight cooling off, and that there is scope for a further move lower in the short-term, but as per the Dow, nothing would be changed on the bigger picture by this:

 

http://stockcharts.com/def/servlet/SC.pnf?chart=$SPX,PMUBDANCBO[P][D20140927][F1!3!5.0!!2!20]&pref=G

 

On the bar chart the S&P also has a very small H&S top which is a bit clearer than on the Dow. If you recall, a classic principle as taught in the Essential Technical Analysis course is to use correlated indices analytically. One chart may be clearer than the other, or one may have started a move or breakout that hasn’t quite happened yet on the related chart. This pairing method is very powerful and is often the closest you get in the markets to something for nothing. Later in the report you will see a similar use of the idea with Gold & Silver. I’ve been using the concept for more than 20 years (ETA was published in 1993) and it has a very good track-record.

 

The next report will be published on Sunday 26 October.

 

(c) Robert Newgrosh 2014

 

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Sep 28, 2014