A Market Timing Report based on the 2-07-2014 Close published Saturday February 8th, 2014

The SP500 Index (SPX, SPY) has completed what could be called an A-B-C correction, which was comprised by one wave down, followed by a B consolidation move (sideways), and then the C wave down to the low this past week.

In just two days, we reversed at the lower target I had from last week (note how the market reversed at that double red line support area I pointed out last Sunday).  Why didn’t it stop and rally just below the 50 day moving average (curved aqua line on the chart below)?  Because the services ISM number was much lower than the expected, coming in just above 50 when it was predicted to be in high 50’s.  The economy is definitely slowing.  There is no question of that.  The question is whether this means 3 vs. 3.5% growth for the US in 2014 or something much lower.  That is the debate the Bulls are having with the Bears.

The Friday employment number was bad, but not that bad, so the market continued the rally it had already started on Thursday as I believed it would from the 1743 area.  This took us to 1797.02, fairly close to the round number of 1800, which the market sometimes is attracted to, but a bit farther from first technical resistance at the 50 day moving average, now at 1809.35. 

Please review my notes on the “Access page” (see below for link), but in brief I believe the rally could fail anywhere between Friday’s close and a lower high above the 50 day moving average.  A complete retopping of the market or (if the news improves substantially), a marginally higher high could occur, but I do not believe the sell-off will end before we at least retest and likely exceed the low just reached.  That also means it could fail right at the 50 day moving average itself.  I will be lowering my equity exposure as necessary.  Be sure to follow my Tweets on Twitter so you can read the very latest updates.

In my opinion, the final low in this correction will be 10-15% below the high we reach on this bounce.  The thing that can change that is a big shift of the news flow to the positive, which might include significant central bank action to shore up the emerging market banking picture.

SP500 Index Chart:

The SP500 is bouncing but how high?

“Time compression”  is about to occur again I believe as I discuss in my “Access” page post this past Thursday.  Sentiment shifts are happening fast.  Be sure to read it.  We could be just days from the next fall in the market as discussed.  It lays out my thoughts about the trajectory of the market.  You can access my thoughts after getting the password here: Free Subscription to My Newsletter and access to my latest comments  I’ll send you back the password to the access page and the monthly newsletter in the same email.

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Look for updates on the main chart tracking pages this week as I feel they are needed and comments via Twitter.

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