Another gap down and morning recovery, this one being a little scarier but not yet seriously breaking the trend up from April 6th which is where I am fixing the last correction. I’m thinking the S&P 500 is late in an ending diagonal up from April 6th with the low today a possible iv in that formation. The alternative is the lower high in wave ii was set on the 18th with a somewhat dissatisfying form against 4164 which is a good number for it. With the Dollar index starting to firm up, I don’t want to be too cute here but can’t be too bearish while above 4139 and the low of the day. As I type, SPX is hugging the 20 period EMA on this 65-minute chart which is reasonable as the market now prepares to consolidate and wait for the econ numbers tomorrow morning. The reaction to those numbers will be what determines if we get another high over that of 18th or the market begins to break lower. From the daily chart I posted last night, you saw that the dominant cycle is entering a several day turn window.
Also of note is this cycle in VXX, an ETN that follow short-term VIX futures. This is a longer cycle than identified on the daily SPX chart and is due to turn up into late May. Perhaps some are getting a head start on “Sell in May.”
This cycle in the S&P 500 components below the 20 day moving average is also interesting in that it is bottoming and forecasted to turn up into the middle of May. This is why that while the short-term form in equities isn’t ideal for a high, I just can’t pound the table for a new high as I think a larger reversal is nearby.