Monthly Archives: January 2017

The Pending Correction

The S&P 500 index four-year cycle bottomed on 2/11/2016.  Since then, we have had three weekly primary cycles.  The cycle performance is as below:

Weekly Cycle Low to High High to Low
2/12/2016-7/1/2016 20-week cycle 17 weeks advanced 310 pts, 17% advance 3 weeks dropped 129 pts, 6% correction
7/8/2016-11/4/2016 18-week cycle 7 weeks advanced 202 pts, 10% advance 11 weeks dropped 110 pts, 5% correction
11/11/2016– 6 weeks advanced 194 pts, 9.3% advance

As the table illustrated, the so called “trump rally” is the weakest among the previous two weekly cycles.  The most bullish weekly cycle is the cycle coming out of the longer term four-year cycle.  As we are getting closer to the one-year mark of the four-year cycle, we are anticipating a correction that will correct the cumulative advance since February 2016.  That will lead to a seasonal low in the first quarter, most likely in February/March time frame.

Based on the percentage decrease of the subsequent cycle strength, we project this weekly cycle high to be 2280-2300.  The pending correction either falls on the first channel line or the second channel line.  The projected correction is either 7-week 5.5% decrease to 2100-2120 or 11-week 8% correction to 2100-2175.

The correction is imminent.  The most likely time frame is immediately after the inauguration.  Smart money has already left the market before the ceremony.  Keep your powder dry and reload during the seasonal low in February/March 2017.

Gold is in the dumpster until Jan 2018

Gold rallied three quarters in 2016.  It went right against the long term down trend channel line in July 2016.  The strong dollar is pushing the gold to violate the support at the previous low at 1064.50, then it will draft down all the way to test the 9.25 year cycle low at 785.60.  Good luck, gold bugs.

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Six-year Old Drug Sector Bull Market in Correction

The drug sector rallied straight from the March 09 low to August 2015.  This is the sector benefited the most from the last four-year cycle.  The leadership has been lost to the present leaders.

It is in correction phase that has more room on the down side.  It only corrected 38% of the 6-year bull market.

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The Top Performing Stocks from Leading Sectors

During the past rally, the leading sectors are banking & industrials.  The leading sectors from the previous cycle have been rotated out of leadership positions.  The following stocks have been selected as representatives of each of the leading sectors.  It’s very encouraging to see the two stocks from the chip sector.

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