There have been 5 occurrences of quad tops in the S&P 500 since 2000. Each top bounced off a resistance trend line four times. The fourth bounce resulted in steep declines for the index. The index is about to test this theory within the next 3-7 trading days as it nears the trend line on the chart above. Could it be a coincidence? Sure, but what is keeping this market from pushing through it now that earnings are over, the Fed is sitting on their hands, Congress is yet to pass the USMCA (NAFTA 2.0), and a China deal is most likely months away (if it happens at all)?
On the positive side for technicals, we finally moved above the 100 DMA which has not happen in months, but the 200 DMA is the next test (also likely to occur within next 1-3 trading days). The break of the 100 DMA could be the real deal or a Bull Trap and a break of the 200 could be the same. The technicals are not encouraging until we move clearly above the 100, 200 and the quad top trend line for the bulls.
This is the quad tops between 2000 and 2015. The first is in Red and the second is in Orange.
The next one is below with the green arrows between 2010 and 2018.
The final two are in Blue and Yellow below from 2016 to the present. The red on here is the same as the red on the main chart above.
Based on your technical analysis when do you think the next move to the downside is.
StockSignaler
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@gvoommen, I am mainly an Elliott Wave guy and we just exhausted a wave 5. It appears the next bolt down could be as early as next week.
gvoommen
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@cguthrie922, As you are an Elliot wave expert, couple of questions.
(a) How would you know that wave 5 has finished and what happens when a wave 5 finishes?
(b) The next wave after wave 5 will it take out the previous low made in December 2018?
StockSignaler
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@gvoommen, I am by no means an expert especially as it is theoretical, but I have been tracking our move up from the December lows as part of a corrective wave that should be part of an ABC wave. As such, I have the activity marked as a B wave itself which should only contain a 3 wave ABC. However this movement has 5 clear waves, which has been contradictory.
If it is truly 5 wave movement, this would signal bullish activity with a short pullback ahead. Because I am ultimately tracking it as an ABC corrective wave, this would signal a major steep pullback ahead.
The next week will shine more light as to what the true medium term course will be. Volume does not support bullish movement as there is too little volume. The move off the December lows has been too fast which supports a bearish future.
All 5 waves have completed the requisite movement to see the current top being near which lines up with the quad top trend line and 200 DMA.
Confirmation of future bullish activity will be a drop to 2640ish and a bounce up. A drop to 2600 and at a quick pace (1-2 weeks) would confirm continued bearish action that would break the December lows.
If lows are tested, this will occur in March which could be driven by lack of China deal and application of the additional tariffs on March 1.