Fireworks continued on Friday as anticipated. As the result, the major indices closed the week with concerning technical parameters and very bearish candle formations.
Let’s evaluate the indices from different perspectives.
This post is part of the Weekly Analyses series that InvestingAngles offers to followers and subscribers.
This SP500 Weekly contains the charts and covers:
– SP500, Nasdaq, Dow Jones, Russell 2000 – TA and Japanese Candlesticks analysis;
– short and long term charts and forecasts for SP500.
TA & CANDLES
Let’s begin with the most bearish.
Once QQQ stopped on Wednesday right below the 200 DMA and made a complete bearish Engulfing on Thursday, it was difficult to not anticipate the fireworks on Friday. In the process, QQQ flipped PSAR bearish, pushed the price below 8 EMA and formed a 50/100 DMA bearish cross. Quite a mix, eh.
SPY, DIA and IWM made similar bearish Engulfing formations and confirmed them strongly on Friday. The majority of indicators support a continued move down. Nothing bullish.
In the previous week analysis I suggested that “Possible formation for QQQ (and others) – Falling 3 Methods – one more week of anemic rally followed by a sharp decline or an immediate decline starting next week”, and posted this picture below.
Before the session today, the subscribers were alerted with this perspective path for the weekly candles.
Weekly Chart – Premium Content
Read more of this content when you subscribe today.
As you can see, IWM formed a classical Falling 3 Methods. The other three decided not to wait for the third green candle. Among the ominous signs are the freshly made 8/20 weekly bearish EMA crosses in SPY and DIA, and DIA closure below 50 WMA, joining QQQ and IWM.
To summarize the TA and Candles, there is nothing even remotely bullish on the monthly, weekly and daily frames. The fireworks are likely to continue.
Earlier we shared the Weekly Analysis on VIX that supports the perspectives for indices. It can be viewed here: https://investingangles.com/2022/02/11/vix-weekly-update-11-02-2022-stockmarket-vxx-investing-trading-volatility/
ELLIOTT WAVES – SP500
As the worst bearish formation – Engulfing – already happened on the monthly, the odds are increasing for this long term bear scenario that we have tracked since September.
Detailed forecast: https://investingangles.com/2022/01/20/sp500-long-term-forecast-bear-case-20-01-2022-spx-spy-sp500-es_f-elliottwave/
While there is a bullish long term forecast, we are not showing it for very low probability.
SP500 Short Term
This is a slightly modified path for February-March. The wave off the top displays several repetitive shapes and ratios (fractals) that led us to change the primary path to purple.
The weekly video (link at the end of this post) covers the detailed analysis of the chart below and the line of thought leading to the conclusions.
- Purple (primary).
Main hypothesis – wave C has started.
The mid term targets: $3230-80, most probable – $3248.
I view $3850 as an alternative target.
Timing for the primary target: March 11-18.
SPX makes a more complex wave B. Comes into effect if ES moves above $4586.
(copy from the previous weekly analysis)
MID-LONG TERM FORECAST:
Expect SP500 to move lower in February, most likely in the second half.
Targets: $3850-3250, or 20-33% loss off the top.
Minimal target – $3850 or 20% loss.
From the monthly forecast on January 30:
The indices could rally in the next 1-2 weeks, the rally could possibly experience many unexpected movements (see-saw).
Short Term Target: $4500-4680.
Keep in mind that this is an attempt to forecast a wave B, the most unpredictable among the corrective waves.
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