Technical Laboratory Update For The Week Of August 7th, 2016

Hello everyone, this is going to be the first of many weekly updates that I will be doing in tandem with Alex's cycle analysis to help shed some light on general market conditions and potential direction.  The market has remained range bound over the past couple of weeks which some have said is topping and others have said is basing.  From a structural market standpoint both groups have a valid argument.  Our technical breakout over the range on Friday to new ATH's in both the S&P and the ES futures market has many under the impression that our new rally leg up is upon us.  With all rallies, and for that matter declines, it is important that trade is sustained at the new found levels.  In this update I'll identify three potential longer term paths and from there we can assess weekly progression and which path currently presents the higher probability.

 

SPX

SPX

The preferred path at present is the magenta one.  All three of these paths revolve around the 2191 area and begin to diverge from there.  The Elliot Wave label definitions are not necessary to understand, they are simply to identify the type of predetermined structure that could unfold from a given area.  The 100 year presidential market cycle chart that was posted on the board a week ago gives more credibility to the magenta ending diagonal path as that has an upward bias running until the latter portion of August and potentially into early September before we run into more sustained weakness.  (see below)

Presidental Election Year Seasonality

Presidental Seasonality

The longer term MSP also coincides with the idea that August is likely to sustain trade in this general vicinity till the latter portion of the month.  Also of note with this chart is the weakness period through July was more of a sideways move than a decline.  This  could be hinting at underlying strength in the overall trend that could manifest itself into a more pronounced August rally than is presently expected and more in line with the purple Impulsive Wave 3 path in the above technical chart.

LT MSP

LT MSP

Based on both the LT MSP and the seasonality chart, the third option in dark grey of an Expanded Flat Wave 2 is currently weighted as the lowest probability but is something to keep in mind as we progress through the month of August.  Ultimately the 2191 demarcation point is key to all three of the scenarios going forward.  From all of us here at MCM we wish you a safe and happy weekend and look forward to seeing you all in the Expert Lounge next week.

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