S&P Primary and Secondary cyclesThe S&P is now reversing down from the January highs
There are two possible patterns for the rest of this month
#A continues to drift lower until the start of the next Month, but then
makes higher highs in February (using the Weekly lows as support)
#B Next week more selling appears and the S&P continues down into the January 50% level @ 1214-1222.
S&P WeeklyThis Week saw the S&P reverse down from the January highs @ 1295, with the expectation that the market would move back down into 1277 (weekly level)
There was an important pattern taking place over the past few days that could have seen more selling next week, with the potential that Set-up B could play out
Keep in mind that the 3-week lows are support levels until the January highs have been reached. Because the monthly highs during the first Quarter have already been reached, the Weekly lows have less probability of supporting the market during the current Quarter.
My preferred pattern this week would have seen Friday continue down into the Weekly 50% level @ 1264, then open up below 1274 (resistance) and then continue down with a first target @ 1258 (weekly lows) and then hold (set-up B)
However, Friday didn’t play out as expected, instead moving upwards and remaining above key Weekly levels.
For the trend to continue down it needs to be trading below 1274. (selling down from the monthly highs and then trading below the Weekly 50% level)
But because of Friday’s price action, I’ve seen on many occasion the following week actually push upwards from the Weekly 50% level and move back towards the highs. (more consolidation at the top)
So my view of continuing lower early next week might not play out as expected, but whilst the market remains trading around the January highs, my continued focus until the dynamics shift in February is to trade on the short side.
