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War Delay
Rally!
INTERMEDIATE MARKET LOW EXPECTED TOMORROW
Tomorrow, 2/20/03 the 39-Week Cycle low is due. The actual low may have
already come in on the 13th of February, with the 20th marking a higher
low and confirmation. The intermediate cycle oscillators are in oversold
position and it looks like this market could have a multi-week rally.
Don’t get me wrong, with war on the horizon this is a high risk
rally; but the opportunity for some quick, significant gains is at hand.
Above is the S&P 500 Index from June of '02 through yesterday. In
the upper frame, notice we may have a higher low being made on Feb.
13th. This price low, in conjunction with the divergence in the short
term oscillator (blue line, middle graph), and the "buy watch"
created by the turn up of the intermediate red and green oscillator
lines (middle graph) add a greater weight to the expected cycle low
date. The blue, short term oscillator should turn down from overbought
by the end of today's price action and could mean a couple of days of
backing and filling before the explosive rally begins. The red and green
horizontal lines on the upper chart are Fibonacci retracement values for
the July and October low to high rallies. The 61.8% Fibonacci
retracement line, which is a strong support, is at 840. The MACD, a
momentum indicator in the low third of the chart shows a positive
structure and also points to higher prices.
The intra-day chart (next
page) shows the battle between the bulls and the bears today at the 840
level. As the market declined into the 840 area at 3:00 P.M. (EST) both
the oscillator and the RSI (middle and lower indicators) posted higher
lows. This shows positive divergence and correctly forecasted higher
prices to come.
How far will it go? After clearing price resistance at
860 the S&P should see a run back to the 900- 910 area. Then we will
have to see how the oscillators line up. Had this recent decline
challenged the October lows, I would have expected to see the price
action back to the top of the range to the 950-960 level. Because it
didn't, I suspect that while this rally will be strong and swift it will
also be brief, 3 to 4 week max. The "Old Reliable" 78-Week
Cycle is due in late March to mid April. While March 11th marks the
early time window for this cycle, I think that the low of February 13th
is low is too early and too shallow to count as the low of this cycle.
The weekly chart shows the short term oscillator has turned up and
approaching the buy watch line. This gives further support to the rally.
However, the 840 level on the S&P 500 is critical support. It must
hold for this rally to gain a foot hold. If it is violated to the
downside for more than a day or two, then we will see a retest of the
October low and we will see it sooner than later.
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