Market Overview- Phase Target Met

For the SPX the long-term trend is a severe correction underway.

For the SPX the Intermediate trend is that the index is completing a downtrend phase within a longer-term decline.  This should be followed by a counter-trend rally before selling resumes. Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discuss longer market trends.

There is a good possibility that SPX has reached its first phase projection from 2116 at the 1858 level, although it could still go a few points lower as a base is created.  A few weeks ago, I mentioned that the distribution pattern at the 2116 level (which was completed on 12/11) confirmed the count of the second phase produced by the top distribution tier that was created after the 2135 top.  

The congestion level at the 2116 level has formed two distinct phases, and it is only the first phase which is at or near its low.  After a rally, the second phase should begin and take the index quite a bit lower.  

Assuming that a short-term low has been reached at 1858, the decline from 2081 measures 223 points. It would be normal for a rally which starts from the low to retrace .382 of that distance, which would take it to 1943 (50% to 1969).

Lately especially, every little move in oil has generated a move in the index. WTIC has not yet filled its potential downside count, but could make a short-term low before it does.  

SPX Chart Analysis

Daily chart (This chart, and others below, are courtesy of QCharts.com.)

On the daily chart of the SPX, I have drawn a down slanting channel which is outlined by two heavy red lines.

I believe that this represents the current trend of this important correction, with prices expected to trade within the confines of this channel for some time to come.  The channel is divided into three sections.  After the August decline which broke out of the blue intermediate uptrend channel came to an end at 1867, we were able to determine the original channel by drawing a trend line across the tops of 7/20 and 8/18, and a parallel across the 3/11 low.  A base was formed between the August and September lows, with the index trading mostly in the lower half of that original channel.  When prices broke out into the upper half, the rally did not stop at the top channel line, but expanded the original channel by another 50% of its width before finding a top at 2116.  At the same time, the bottom channel line of the blue intermediate channel was back-tested.  This created a broader bearish market channel which divided itself in three nearly equal sections.