I like when the major US indices/futures complete the same candle pattern. It make it so easy to assess. I truly wanted them to make a Three White Soldiers, but they formed a Deliberation, a bearish one.
Let’s evaluate the perspectives for tomorrow from different angles.
This SP500 overview contains the charts and covers:
– SP500 and other indices – TA and Japanese Candlesticks analysis;
– short and long term charts and forecasts for SP500.
If you want to learn about perspectives for Nasdaq, Dow Jones, Russell, FTSE, DAX, CAC, ASX and NIFTY, the Weekly Analyses were updated over the weekend and can be viewed here:
Today the futures formed a rather clean Deliberation combo that is well supported by certain indicators. Typically, the combo leads to a minor pullback, but also could trigger a major sell-off. The path will likely be defined tomorrow and will be very dependent of the type and size of the Friday’s candle.
The last candle of the week will have an impact on the weekly candles that will also be printed tomorrow. The current candles are bullish and a really strong sell-off is required to make them neutral. SPX would need to lose about 1.7%, NDX and DJI – about 2.1% and 2.6% respectively. Is it possible? – Everything is possible in this market, but the probability is low at this point.
If we look at the 3-day candles (above) for SPX, despite the size of the candle that closed today, it is still bearish. It would be bullish if it closed about 0.6% higher.
Yesterday I mentioned that SPX could be forming a Falling 3 Methods candle combo. It still remains the main hypothesis until negated.
ELLIOTT WAVES – SP500
The long term forecast was first charted in September and simplified in December. The detailed analysis was posted on January 20 and there have been no changes since: https://investingangles.com/2022/01/20/sp500-long-term-forecast-bear-case-20-01-2022-spx-spy-sp500-es_f-elliottwave/
The most recent chart can be viewed in the weekly analysis.
SP500 Short Term
We have been tracking these paths since February 5th. So far, we have not seen an event that would trigger a change. However, after the last two days, SPX opened an option for a much longer corrective action and I would not be surprised if this corrective wave will take a year or so to develop, similarly to what Russell did in 2021.
In order to cover this scenario, I added a blue count.
- Red (primary).
Main hypothesis – wave ii of C ended and wave iii of C is about to start.
A rally towards ATH. Wave i of 3 has possibly ended and a pullback for wave ii is about to start.
If SPX forms a supporting weekly candle tomorrow, this count will become the primary one.
Wave v of C is about to start.
A much more complex corrective wave that would take multiple months to complete. A possible shape – rectangle.
SPX (and other indices) are quite bullish on the daily frame. The technical indicators are turning bullish. The indices have a good chance to build upon the rally of the last two days and produce strong reversal candles on the weekly frames on Friday.
Until the weekly confirms a reversal, I continue to maintain the bearish targets identified at the beginning of February.
Mid Term Forecast:
(unchanged, copy from the previous six weekly analyses)
Targets: $3850-3250, or 20-33% loss off the top.
Minimal target – $3850 or 20% loss.
Possible timing – mid April.
For a complete picture, it is highly recommended that you read the daily VIX analysis:
*** End of Analysis
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