SP500 September 2011 Outlook

Transcription

1 SP500 September 2011 Outlook This document is designed to provide the trader and investor of the Standard and Poor s 500 with an overview of the seasonal tendency as well as the current cyclic pattern of the SP500 for the month of September While this information is considered valuable and insightful, in no way should it be considered infallible. There always remains an element of randomness in the markets that require some allowance for deviation. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. If you use this information for the purpose of trading, you do so at your own risk. Review of the July Outlook In the previous release of this document on the SP500, titled SP500 Market Forecast for July 2011, the first section dealt with The Current Cycle, outlining the cycle pattern for the next 20 days leading into the middle of July. The first thing reported was that the dominant cycle is clearly bearish for most of July. Within the dominant cycle, this section of the report discussed the shorter-term cycle that appeared to be bottoming around the time of the release of that document (6/27) and rising until around 7/7 where the cycle topped out again, and then dropped into the 7/15 time period before it started rising once again. On page two of that report, a visual representation of that cycle pattern was provided, with the approximate dates for where the cycle top and bottom appeared likely to occur for the next 20 days into the future. On this next page of this report, I have included a copy of that cycle pattern graph from the previous report, along with the current daily chart of the SP500 for the purpose of comparison. Let s see how things turned out. 1

2 Here is a copy of that cycle pattern graph from page 2 of SP500 Market Forecast for July Below is the section of the daily chart of the SP500 that corresponds to the time period represented by the cycle pattern graph above. As you compare the actual price movement of the daily chart shown above with the anticipated cycle pattern provided in the 6/27 SP500 Report, I believe you find that our expectations for the SP500 turned out to be quite accurate. Unfortunately, the cycle analysis could only be made out 20 days into the future. It would have been nice to have included the rest of July in the previous report, but the accuracy really drops off when you try to go too far out. This is why I recalculate my cycles every few days just to make sure that the current data is included in the analysis. Since this report only comes out every few weeks, it is impossible to do 2

3 this type of updated analysis on an ongoing basis. That is why those with our membership would have an added advantage. If I do not provide any updated information within the membership for the SP500, any member can ask for this information to be updated and it is if there are any changes from the previous. Nonetheless, knowing what was to occur from the end of June to the middle of July would have proved extremely profitable to anyone who followed the direction provided in that report when making trade decisions. The Current Cycle The cycle pattern that is presented here represents the anticipated cycle swings and where the swing tops and bottoms have a high probability of occurring. The dates on this cycle graph is an approximation of the time period being represented. Again, as in the previous report, we see a short-term and mid-term cycle at work. There are more cycles at work than just these two, which accounts for the deviations we should expect to occur. However, the two closest to the current short-term time frame are represented above. It would appear that prices are likely to rise into the Labor Day weekend. It would also appear that from this graph prices have a high probability of moving lower for a week, as indicated by the 9/13 estimation. Running this analysis on weekly price data does not allow for the more precise indications we get from just looking ahead 20 days, as we ve done above. However, it does provide a rough guess as to what we could possibly see on the longer-term. From a weekly perspective, it appears that following the mid-september (approximately 9/13) shortterm cycle bottom, the longer-term cycle moves up into November-December. It appears to suggest 3

4 that the Stock Market should rally to recover at least 50% and perhaps 62% of the drop it made from week May 6 to week August 12. I would suggest that you keep an eye on those retracement levels, for when price reaches them, whether it be November or December, or quite frankly, October for that matter (remember, the weekly will be less precise), you could see that rally coming to an end and the bearish trend resuming. If you reading my analysis for the very first time, you may not be aware of my market forecast that the SP500 would likely make a serious top during the Summer of 2011 that will start the second leg down of drop that started from October You would have to be in serious denial if you do not see the writing on the wall. May 2011 is currently the MAJOR TOP in the SP500 and that my friend is in the Summer of 2011! My analysis further suggested that we could see this market move lower into the Summer of Therefore, I firmly believe that the SP500 rally currently in motion now is likely to meet around at 62% retracement of the May to August 2011 drop, and that there is good probability that the rally would end around November 2011, give or take a monthly bar. November markets the center of the long-term cycle top. Review of the July 2011 Seasonal Tendency In the previous July 2011 report I released for the SP500, it reported that the Seasonal Tendency for the SP500 was bullish into the first week of July, then bearish for most of July until the final week, where it would then resume a bullish bias. Looking back now on what has occurred in the SP500 for July 2011, we note that from 6/27 (when the report was released) to July 8 th (where the SP500 make the most recent major top), this certainly fits the seasonal expectations for the beginning of July being bullish. From there the SP500 turned bearish into July 18 th. This is a close representation of the expectation for the market to be bearish for a good part of July. It had a rally from July 19 to July 22, about 4 days, before it resumed its bearishness well into August 8. The report also shared the Seasonal Data Report. Along with this report was a look at our weekly FDate turns forecasted. If you have that previous report, you may have noticed this comment: the next weekly FDate shown on the chart is for the time period of week 7/22. week 7/22 and week 8/5 are time periods where peaks and valleys often form. A look at your SP500 chart will clearly show that the BEGINNING of the recent major drop in the SP500 started on week 7/22 and ended just two days after week 8/5! You can see this on the next chart. 4

5 SP500 Daily Chart

6 SP500 Seasonal Tendency for September 2011 The Seasonal Tendency for DECEMBER SP500 appears to be bearish across the board. What is interesting here is that it is bullish leading into early September. This matches the expectation of prices rising into Labor Day weekend as the cycle pattern suggested. Following Labor Day weekend, we see prices start to drop off. However, where the cycle pattern suggested another rally to start around the period of 9/13 (approximately), we do not get that confirmation from the seasonal graph above. So if what this tells me is that, although you should expect rallies to occur within September, it is likely in a weak environment with bearish pressure being strong. 6

7 The Seasonal Data Report will not be provided in this report like it was in the last, only because the information it is providing for September is all over the map. If I were to speculate on it, I d say it could be a highly volatile month. But that s just pure speculation for such erratic data. What we will look at in this report is the Seasonal Heat-Map and Historical Statistics tool found in the FDates 2009 program. This tool deals strictly with the historical statistics of the market analyzed. The statistics shown on this Heat-Map is just for September 9. I had to point at something, so I left it on 9/9, as it has a strong bullish indication. The heat-map above the statistics, however, covers the whole third quarter of the year (July September). I noticed immediately that there is a blue ban spanning from 9/7 to 9/17. If you look at the short-term cycle pattern for the next 20 days on page 3 of this report, you ll note that it indicates a bearish drop during this same time period! This could be confusing if you put too much stock in the seasonals and not enough in the cycles. As I have already demonstrated from my previous report, the Cycles and the FDates (turn dates) provides the KEY timing information. The seasonals gives us a look at what the tendency of the market has been in history. The heat map does help us appreciate that this time period of 9/7 to 9/14 appears to be a wave in one direction, whether it be up or down. This year could see this time period INVERT from its seasonal norms. 7

8 Based on the Annual Cycle Swings indicator found in the FDates 2009 program, it indicates that a TOP on 9/9 would likely result in a BOTTOM for 9/21. However, if the inverse were to occur and we saw a BOTTOM for 9/9, we would then expect a TOP for 9/21. The CLUE as to what 9/9 will likely be is based on what we see for 9/5. Whatever 9/5 turns out to be, 9/9 is expected to be the OPPOSITE. Again, this is all based on STATISTICS. But statistics or not, I WILL be following this expectation carefully when planning my own trades, and you may wish to do the same. If you did so following the last report I released, you are now smiling from ear to ear. RECAP of the JULY 2011 Daily SP500 Turn Dates Turn dates were provided in the previous report using two special indicators. One indicator deals with GANN PHASES, the other SEASONALS. Other than what was mentioned within the text of the report, FDates were NOT provided as these are provided only within the FDates Membership. Gann Phases We expected a turn for 6/27 and got a significant swing bottom right on time. The next two turn dates from this indicator dealt with 6/30 and 7/4. 6/30 is a day of the higher-high bar formed before the Holiday break, and 7/4 was a non-trading day and cannot be evaluated. Since prices moved lower down to 7/6 before moving up again, we can conclude that 6/30 was a top one day early. Then came the 7/11 forecast that produced a major top the day before. Prices then dropped nicely to bottom on 7/18, which is the exact next forecasted date. 7/20 did not produce anything, and the next major top was formed a day early of the 7/25 forecast. The major bear started at this point and pretty much walked all over the 7/29 corrective low that formed a day following the forecast, because after 8/1 formed a new higher-high, it became an outside bar and dropped lower, producing a lower swing top as the days moved lower from there. Overall, the Gann Phases worked out well. Seasonsals 6/27 was also predicted a turn date with Seasonals and we know that turned out to be a really good bottom. Also ignoring the 7/4 Holiday and any turn dates associated with that time period, we see that it also called 7/11 (a day following the major top). It deviated from the Gann Phases in that it pointed to the correction between 7/8 and 7/18 before calling 7/19, which is a day of the 7/18 bottom. It then followed the same path as the Gann Phases from there. So it did a pretty good job as well. 8

9 Turn Dates for September 2011 Now we will focus on the turns expected to occur for September. This month I m going to provide you with the Seasonals and Historical Cycle Pattern (Dynamic Cycle Extraction). SEASONALS 8/30 9/5 9/9 9/13 9/19 9/21 9/28 9/30 HISTORICAL CYCLE PATTERN 8/31 9/6 9/12 9/19 9/22 9/27 In Summary: The overall outlook for the SP500 appears to be in a RALLY mode from the drop from week 5/6 to week 8/12. The expectation at this time, if we were to agree with the weekly cycle pattern, that there is good probability that the SP500 could recover 62% of that drop by November But again, I prefer to watch this market unfold a few days at a time and recalculate, rather than put all my eggs into a weekly outlook. Meanwhile, the month of September is seasonally bearish, and the short-term cycle pattern appears to agree with this, as it rises only to Labor Day weekend, then it drops to around the 9/13 time period (approximately), rallies to around the 9/22 time period (approximately), before moving down again to the end of the month. This cycle pattern appears to match the seasonal tendency once again. Two weeks stand out for September for time periods to watch for daily trend change. Around the 9/2 time period and around the 9/30 time period. Cheers! Rick Ratchford ProfitMax Trading Inc. 9