Once again we present the Wayne Whaley “Turn of the Year” barometer, which is similar to other January barometers except this one bookends dates from November 19 to January 19. The predictive value is shown in the chart below.The interpretation goes like this: When the S&P 500 (SPX) performance between November 19 to January 19 is 3% or more, the probability is overwhelming bullish for the remainder of the year. If the performance is between 0-3%, then it’s a mixed bag with a bullish edge. When the performance is negative, the bears get the upper hand. This Turn of the Year barometer or TOY barometer is helpful in keeping the overall perspective of expectations during the year. For example in 2015, a -1.57% November 19, 2014 – January 19, 2015 performance gave a lot of weight that 2015 would be the year that the SPX would not be as bullish as the previous years. The SPX closed barely positive. Now looking at the present and the future, November 19, 2015 to January 19, 2016, the SPX performance tracked a 9.17% loss, the worst ever recorded since it was first tracked in 1951. This magnifies the odds for a bearish 2016.
Continuing on the prospects of 2016, the SPX is currently holding up relatively well despite huge currency adjustments, falling commodity prices, and the big slide in oil. The long drawn out sideways price action looks to continue. To change this, the primary focus is on China. Market participants know China needs to correct itself, and the SPX is willing to stay on the sidelines until it is satisfied China will not crash and burn. The monthly SPX is coiling and it is ready for a catalyst that will either propel the SPX to even greater heights or quickly unwind downward. 2016 looks pivotal.
S&P 500 (SPX) SHORT TERM OUTLOOK: NEUTRAL
Bearish if SPX closes below 1881.63, same as Daily Outlook.
The bearish case may seem a bit aggressive considering the turnaround that just occurred last Wednesday, January 20, but there is an unfinished TD Buy Countdown and TD Combo Buy counts that suggest another low is not out of the question. A closing bar above the designated TDST Resistance at 1934.47 would provide the SPX the capacity of a higher price retracement off the lows.
S&P 500 (SPX) SHORT/INTERMEDIATE TERM OUTLOOK: NEUTRAL
Bearish if SPX closes below 1881.33.
While the SPX is processing the potential low, we’ll give the bearish side the benefit of the doubt if it the SPX reasserts itself with a bearish price flip. If it can successfully retest the low, a bullish case can be considered.
S&P 500 (SPX) INTERMEDIATE/LONG TERM OUTLOOK: BEARISH
Neutral if SPX closes above 2043.94 on Friday, January 29, 2016.
The weekly SPX has recorded nearly all the necessary ingredients for a price exhaustion low – a ‘perfected’ TD Buy Setup above the TDST Support at 1850.61. What happens on the final ‘9’ count this week will help determine if a bullish outlook is in the cards.
S&P 500 (SPX) LONG TERM OUTLOOK: NEUTRAL
Neutral until further notice.