In the last letter, I suggested that SPX could have a final thrust to 2690+ which could turn out to be the final high before it was pulled down into the January cycle lows. On Monday, it obliged with a high of 2695 followed by a decline of 18 points before stabilizing. It then rallied back to 2693 in what looks like a secondary high before declining again to 2679 on Friday, and closing the day with a bounce of a few points.

There are good reasons to believe that 2695 is, at least, a temporary high which should bring about a decent, though not excessive, correction. One of the most reliable cycles is expected to make its low between January 4 and January 12 (if the full span is achieved) which, when you take away the holidays, is not that many trading days away; especially when, in a bull market, the cycle has the habit of topping a couple of weeks before it makes its low.  

Also, 2695 was the target for the P&F count taken across the 2636 line, which was confirmed by another projection from the 2654 low.  But, as mentioned before, ad nauseam, the index must now show us that it has reversed.  Fortunately, we won’t have long to wait.  On Friday, SPX found support at a key level which will be shown clearly when we analyze both daily and hourly charts.  So, let’s get-on with it.

Chart Analysis  (These charts and subsequent ones courtesy of QCharts)

SPX daily chart (+GDX):

This week, I want to show you the daily charts of SPX and GDX, side by side. If you recall, last week I mentioned that SPX tended to make a high when GDX made its 52-wk low, and I drew a vertical dashed line on the charts a few weeks ago to identify that date. Although GDX appears to have made its 52-wk low a little early (I’m splitting hairs now), I believe there was an 8-wk cycle bottoming just ahead of it and there is also a 10/20-wk cycle in there somewhere. You can see that GDX was very obedient and turned up precisely in that time frame. So far, if SPX made its high at 2695, it would be spot on with the low in GDX but, as mentioned above, it will have to prove that it has, so we need to wait until next week – possibly only until Tuesday morning – to have that confirmation.