Friday, January 24, 2014

Oulook for week of Jan 27 and Feb 2014

In my outlook for 2014 I showed a series of charts (and gave reasons) to be wary of the market.  My cycle chart (below) indicated a top mid  January.

And I posted a comparison of 1929 and today's market.  If that comparison works out then we should have seen a market high followed by a steep sell down.  We got  a new high and possibly the start of a sizable pullback.  Time will tell - here is that comparison:

And in my outlook a couple of weeks ago I indicated a top coming (seems I may have been a week or so early as I expected a couple of hard down days last week and had indicated  a target of 1790.  Now I need to revise the possible downside based of the 100 day Wall cycle (as the 1790 projection was using a shorter DPO of the half Wall cycle). Should  lower the downside target for next 10 weeks.

Last week  I gave you several reasons to be wary of the market even though I expected more a sideways than a down market (got that wrong). Some questioned my conclusions (but I try to avoid technical fights) so my response when asked about the longer cycles: 

"But, keep in mind it may take several months (say 20% of the total cycle or 6-8 months) to go top to bottom. In other words except for 1987 it has taken more than a very few days to achieve a correction. Note: the markets normally take longer  (usually 70-80% time wise) to go up and less time (20-30%) to correct."

This week seems there were a lot of future layoffs announced (IBM, TI, Sam's Club,  and several others).  When you start seeing lots of such announcements makes you say hmmmmm....  Earnings continue to be less than stellar as a whole.

Looks like we may be repeating the pattern we saw back in Aug/Sept the last time the  we saw a Wall cycle top and half Wall cycle bottom together.  The difference maker this time is the 1/3 Kitchin cycle is also topping and turning down so the downside may be greater??  Time will tell.

Here is a visual.  I suspect with the 1/3 Kitchin cycle down and Wall cycle down thru February and into March.   Usually every 3rd Wall cycle sees the larger decline when it is bottoming in sync with the 1/3 Kitchin cycle (August Wall bottom?).  The 1740-1750 target does not account for the impact of the 1/3 Kitchin cycle.  I will try and account for that at a later time.

GL traders

Update:  Looking at the lower trend line we should expect support around 1740-1750 so that is the next potential downside:

Of course Yellen's first act may be to "untaper" and increase QE to try and prevent a substantial market correction.  If that happens it could postpone a correction for a short period of time.


  1. Long term outlook later if I get the charts ready....

  2. If Yellen were to raise QE..that would really display just how scared the Fed are.
    As it is, I don't expect that. Maybe they will delay taper-2 until mid March.

    Regardless...a key low..late summer remains the time to the load the truck. Have a fun week Inlet. Indeed, at least its not boring now! The months ahead will likely be very busy a lot of the time.