Stock Market Update – November 19, 2012
The S&P 500 bounced 2% on Monday, so what does that say about the market outlook? Well, nothing has changed; the market broke lower at the end of October and likely has further to fall.
The chart below shows the break lower I am talking about.
We have seen the first leg down of the decline, and could now see a rally, although if a rally develops it is unlikely to climb back above 1430 on the S&P 500. This is the resistance area created by the market peak in September and October.
After a brief rally, we will likely commence the second leg down, taking us below the recent low of 1343.35….and likely into the 1320 to 1300 range. At that point I will put a new analysis.
I have drawn white lines to the right of the price bars to visually show what I expect. The white lines represent my price expectations, but not time expectations. It may take longer or shorter for this corrective wave to complete than my drawing shows.
A rally back up to the high of 1474, while I believe it is unlikely, would indicate that the correction is over and another wave higher is underway.
If the September high turns out to a long-term turning point, and I believe it is, then the corrective wave I have drawn will only be a portion of the much larger corrective wave on the longer-time frame. In other words, it could get much uglier.
If Monday’s rally continues, then I will draw a trendline right under the lows of the bars as they rise. As soon as that trendline is broken I will be looking to go short/add to my short position. For examples of this type of trade set-up, see the forex trades below.
While these are my views, it is not a recommendation for you to buy or sell. Please consider your personal situation when making investment decisions, as this is not personal investment advice.
Cory Mitchell, CMT
A couple weeks ago I was introduced to a piece of financial research software…and I have been using it ever since.
It’s called TradeMiner, and basically it allows me to quickly and easily see any trends or tendencies in stocks, currencies or futures.
Simply put, it helps find historical market patterns and cycles on a seasonal basis. I’ve been using it along with my technical methods, and it has been a great companion.
It is a cool, easy to use little piece of software which generates loads of trade ideas and can basically be used in conjunction with, or in addition to, any trading system or strategy.
TradeMiner has three versions, Stocks, Futures & Forex So there’s something for everyone: