Market Turning Points – More Congestion (Distribution)


Market Overview

SPX traded in a less than 50-point range last week, continuing what appears to be the formation of an intermediate distribution top which could bring a sizeable correction when complete.   IWM, which has done a good job of acting as a barometer for SPX still provides the same reading of relative weakness, thereby advising caution to those who have bullish inclinations.  Last week has brought us one week closer to resolving this stalemate which is now 12 weeks old, but a little more patience is still required, and a slightly higher high cannot be discounted.

S&P 500 index

Market Analysis (All charts are courtesy of QChart)

SPX daily chart

My analysis suggests that the resolution will be to the downside.  Beyond the relative weakness of IWM, the weekly SPX chart above shows a clear loss of upside momentum.  The top of its long-term bull channel was last touched in January 2018.  After a pull-back, a new high was made in September 2018 which fell short of the channel top by about 75 points.  This was followed by a sharp correction and another new high in July 2019 which, this time, failed to reach the top of the channel by almost 200 points.  And here we are, in October, and that last high of 3028 remains intact. 

Another point!  The intermediate trend line from 1810 (January 2016) was broken by the correction of late 2018.  I have extended the trend line on the chart and, as you can see, the index has remained below it.  It also remains below the red trend line which connects the last three intermediate highs.  I believe that the only rational way to interpret the market action of the past year or so, is by seeing that structure as a large rounding top which, sooner rather than later, will result in a correction that could be even more substantial than the 623-point decline which occurred late last year — although it could take longer to complete. 

The market can avoid this intermediate-term correction (also implied by other analytic points not discussed here) by starting to engage in decisive bullish behavior, beginning with IWM leading on the upside!  If, instead it declines below 2820, and then 2720, the odds are pretty good that the correction will not be over until we see the likes of 2200!   After that SPX can rise to a new high!

SPX Daily

SPX hourly chart 

On 7/26, SPX made a new all-time high of 3028.  After a correction, it went up again, but could only reach 3022 before correcting again.  Last week, the index looked like it was beginning to struggle just above 3000.  On Friday, after showing some negative divergence, CCI gave a sell signal along with the other two short-term oscillators which was not voided by a subsequent rally. 

The daily channel line was first breached in early September, and more decisively broken after the rally to 3022.  Still, there were enough buyers at 2860 to rally the index inside the channel one more time, last week.  But by Friday, all it could do was hold on the line at the close while all the oscillators remained in a sell mode.  It will take some good news over the week-end to keep SPX in a short-term uptrend! 

This is not a good looking pattern, short-term.  It looks as if the index has already made a top and wants to reverse.  But it will take a break below 2860 (minimum) to get the daily and weekly oscillators in a solid downtrend. 

SPX Hourly

UUP (dollar ETF) daily

UUP has started to correct, and nearly reached the bottom of the blue daily channel.  This is partly due to the rally in the British pound and may not be long-lasting.  In any case, it would take a break outside of the blue channel to suggest that the dollar has made a substantial trend reversal.

UUP Chart

GDX (Gold miners ETF) weekly

After making a new low, GDX has bounced to the mid-point of its current corrective channel.  This could be all we get for now, especially if the dollar rallies.  The pattern as well as the oscillators suggest that more work (and perhaps reaching 25.50-26.00) is needed before a reversal capable of leading to a new high takes place.

GDX chart

CCG (canopy growth) daily

The faintest signs of deceleration are appearing in CGC.  A quick glance at the P&F chart suggests that the downside correction may have been met.  Even if it has, it is unlikely that CGC would do much more than a quick rebound followed by a base-building pattern.


BNO (U.S. Brent oil fund) daily

BNO looks vulnerable to additional decline from this level.

BNO chart


SPX may not be very far from starting a correction which could rival if not surpass the one which occurred at the end of last year.  Only an immediate and obvious resurgence of buying could alter this perception.


It has been many years since I was introduced to technical analysis by a friend. I immediately realized its value and learned everything I could about it, starting with the Wykoff course and later ...continued

Comments on this analysis

Your email address will not be published. Required fields are marked *

Latest Related News

Stock averages recoveries fading (S&P 500 forecast)

Global share indices tried to advance further on Tuesday into the end of quarter (end of the Japanese fiscal year) but have been unable to resume the bullish themes seen through latter March, last week.The subsequent hesitant setback over the past 24 hours may have reflected recovery fatigue, but also potentially a conclusion to end of month/ quarter, rebalancing flows.We see the short-term threat for… Continued

Next Cycle Low ~4/7

The first countertrend rally took SPX to its 200-DMA  where it was repelled. IWM did not fare nearly as well and remains with considerable relative weakness to the SPX.  There may be some additional trading within the range established this week, with the next short-term low due ~4/8.  An intermediate low is not due until mid-year. SPX daily chart Last Monday SPX made a low… Continued

Stock indices build on bases with firm recoveries (S&P 500 focus)

Global share indices advanced further Thursday, as we had flagged in our report on Tuesday with the US Senate passing the $2 trillion economic relief bill, which moves to the House on Friday.Stock averages have pushed up through numerous resistance barriers, to build on bases and confirm short-term recovery themes.We still do NOT see the conclusion to the bigger bear market established in March, but… Continued

Stocks bounce but still heavy, with US economic relief bill stalling – S&P 500 forecast

Global stocks averages have rebounded overnight into Tuesday, despite the US Senate stalling on the $2 trillion economic relief billAsian and European stocks have advanced through resistance levels, BUT are far from bullishUS equity futures, however, remain under negative pressures having gapped lower to new bear cycle lows onHere we focus on the future on the US benchmark average, the S&P 500, which has underperformed… Continued

Minor Cycle Bounce – Market Turning Points

Point & Figure overview of SPX Long term trend:  Although I do have a potential lower target in mind, I will wait for some confirmation before disclosing it. Intermediate trend:  Maximum 2170 this phase.  Larger drop into mid-year after relief rally. Important  cycles followed I follow only a few cycles that I consider reliable in my analysis.  This is complemented by the analysis of Erik… Continued

Forex Brokers in your location