Markets are showing expanding turbulence. While an interim bottom is expected next week, the damage has been deep and suggests the low will be revisited and likely surpassed. From the above weekly S&P 500 (SPX) chart, the weekly is well below the 4697.96 pivot from Wayne Whaley’s TOY barometer studies. Based on his studies, there is about a 38% chance 2022 will end up positive.
For next week, the daily S&P 500 (SPX) is on track to record a TD Buy Setup @9 on Wednesday, January 26th, which coincidently is a FOMC meeting. With the SPX below the 200 day moving average, probability is selling will continue and a TD Buy Setup @9 will record. A ‘perfected’ TD Buy Setup (The low print of TD Buy Setup @8 (Tuesday, January 25th) or @9 (Wednesday, January 26th) is lower than TD Buy Setup @6 (January 21st) and @7 (January 22nd lows) will set up the start of a meaningful rally in the middle of the week.
Bitcoin (BTC/USD – Coinbase) and the whole crypto sphere has crumbled. Similar to the SPX and other indices, there is a setup next week for a decent counter trend rally. The daily has an active TD Buy Setup @6 and will likely record a TD Buy Setup @9 on Monday, January 24th. Note the weekly TDST Support at 34846.78. That’s the allowable level BTC can draw down to and keep maximum confidence for an upside move.
The S&P 500 (SPX) was able to rally early in the week to a standard 61.8% Fibonacci retracement before dropping to end the week near the middle of the weekly range. The current trend is skewed bearish, and the best thing the SPX can do is wash out by continuing the active TD Buy Setup currently on a 2 count. If TD Buy Setup stays active, TD Buy Setup will record a 9 count right on the first FOMC meeting of 2022 on Wednesday, January 26th. This represents the clearest risk/reward choice to buy the dip as the first rate hike will probably be priced in. If the low has been made last Monday, January 10th, the SPX can undo much technical damage by surpassing the 45 and 60 minute TDST Resistance at 4729.39. The most probable outlook for the week is none of the above and markets churn in a volatile range.
From the Nasdaq Composite (COMP) the TDST Support at 14571.64 can help dictate the next price trend. Close below 14571.64 starting Tuesday, January 18th, and probability of the SPX seeing TD Buy Setup @9 becomes high. Hold the level, and the focus is on the volatile churn or to a lesser extent, another bull run.
The daily CBOE 10-yr Treasury Index (TNX) which represents the yield for the US 10 year recorded a TD Sell Setup @9 last Monday, January 10th. Note previous instances shaded in the chart. There are two recent instances and both show a dip after recording a TD Sell Setup @9 before marching to another high before true exhaustion occurs. If we handcuff the SPX and TNX together, and make the assumption the SPX does record a TD Buy Setup @9 next Wednesday, January 26th, and the TNX follows the same pattern by overrunning TD Sell Setup perhaps 2%, the next leg will suggest retreating yields and higher SPX.
Bitcoin (BTC/USD – Coinbase) has officially recorded a TD Buy Setup @9 on the weekly chart. It now has the conditions to make a run following the SPX course. 50-53k is the obvious first price target.
The signal for the S&P 500 (SPX) is off the wrong start mostly in part to tech stocks. The SPX is below the 2022 bull/ bear level of 4697.96 to end the week. Closing below that on January 19th will have volatile implications for the foreseeable future. The trend indicators utilized in 2020 and 2021 may need to be switched out to overbought/oversold oscillators for 2022. In the near term, next week should see a reflexive bounce and possibly halt the active daily TD Buy Setup….
To address the ‘when’ for next week, the four hour short term timeframe for the SPX is closing in on a TD Buy Setup @9 for Tuesday, January 11th. There are catalysts on the financial calendar to call for a short term reversal. Jerome Powell testimony on Tuesday and updated CPI numbers on Wednesday. Other short term time frames are about to be confluent with the four hour SPX as well. When Jerome Powell speaks, it’s generally more bullish and a hot CPI release should already be expected. This sets up a contrarian move.
The CBOE 10 year Treasury Index (TNX) chart suggests price exhaustion in the middle of next week as well. TD Buy Setup @9 looking to record as soon as Monday. This should put a lid on the hot energy and financial sector and give a lift to tech helping the overall market.
The weekly SPX has price flipped bearish. This now provides a negative aspect for the market. If the presumed short term price exhaustion next week turns into a sustainable short term rally, the weekly can regain the bullish footing with a close above 4697.96 next Friday, January 14th.
Crypto broke down and the leading crypto Bitcoin (BTC/USD – Coinbase) is in a volatility squeeze to the downside. In search of a potential bottom, the daily chart can record a TD Buy Setup @9 next Tuesday (similar to equities) and the weekly chart should be able to record a TD Buy Setup @9 next week.
Happy 2022. It’s a new year and a new proposed outlook long and short term. The TLDR for 2022 is bullish positioning to start the year and as long as January 19, 2022 doesn’t close below 4697.96 and the weekly SPX doesn’t price flip, bullish momentum should continue the course until late February through early March. It’s at that point longer term charts come in which translates into a proper correction. 20% or more would not be a surprise. Once the market gets oversold enough for a counter rally, the next phase is to see if the rally can produce another all time high before 2022 concludes.
By all means, price in the yearly S&P 500 (SPX) has already entered price exhaustion territory as exhibited by the above chart. This is not actionable since most investors do not trade in yearly timeframes. It serves more as a warning that the bull market is ending or near the end. The 2021 candle showed momentum carry over in 2020 from a TD Sell Setup @9 to TD Sell Setup @9 +1. Since the SPX is trading under the yearly TD Risk level of 5328.54, the TD Sell Setup @9 recorded in 2020 is still valid for a reversal. If momentum carry over continues by breaching 5328.54, we can look at a maximum high in 2024.
To get a better look for 2022, turn to the quarterly SPX. The current counts coming into the year are TD Sell Setup @8 and TD Sell Countdown @9. Based on these TD Sequential counts, the timeline for a reversal in 2022 is January – June. Out of these six months, March is the sweet spot as shown by the monthly and weekly charts below.
The monthly SPX has shown strong momentum from the March 2020 bottom. Currently there is a TD Sell Setup @9 + 10 and TD Sell Countdown @10 to finish 2021. Assume TD Sell Countdown completes unabated and TD Sell Setup reaches maximum carryover, a peak is centered in March 2022.
Weekly SPX can record a 9 – 13 – 9 DeMark count, and if the last TD Sell Setup @9 completes, date would conclude in late February or early March 2022.
From the daily SPX, note the November 19, 2020 close at 4697.96. To get a great look if 2022 will be a positive or negative year, quant analyst Wayne Whaley used the period from November 19 – January 19 to help determine the outcome of the new year. Main takeaway is bullish traders do not want to see the SPX close below 4697.96 on January 19, 2022.
Bitcoin for 2022 should correlate with the SPX as it is transitioning from niche holders to mainstream holders. For the near term, there are a few forces in progress. From the daily BTC (BTC/USD -Coinbase), a TD Buy Countdown @13 was recorded on December 21st, 2021. There is enough for a bottom to be made, but there is no conviction to the upside so far. On Chain metrics are also lackluster. Therefore, BTC either shows a bottoming formation through the TTM_Squeeze indicator at the bottom of the chart or like previous instances, another quick leg lower brings in the buyers. For a quick leg lower, that would align with the weekly chart as the next two weeks it can record a TD Buy Setup @8 and @9. Moving forward, BTC will need a lot of repair to get to new highs as the TDST Resistance levels for various timeframes are staggered too far apart.
The market response to the FOMC meeting was decidedly bullish, but the rally was completely washed out the following two days. The S&P 500 (SPX) is now back where it started pre FOMC. The current narrative still remains bullish as none of the related indices are not broken though challenged. More on that below. With volatility via the VIX above 20 again, short term charts matter more to provide early warnings. From the 30 minute SPX chart, a perfected TD Buy Setup @9 has been recorded. The minimum amount of work has been satisfied with a mild upside response to the 9 count. To remain bullish, the 4613 TDST Support level needs to hold. Acceptable if there is a close below it, but three straight lower closes would firmly establish the 30 minute SPX in TD Buy Countdown which translates to lower prices overall.
There is a different narrative worth monitoring should the 30 minute SPX break the 4613 TDST Support. A 4613 break would suggest the daily SPX would be falling into a volatility squeeze where prices goes range bound. This will make a breakout or breakdown more visible probably as soon as next week.
The Nasdaq Composite (COMP) also holding the line in keeping markets overall bullish. Trouble comes when the short term 2 hour TDST Support at 14931.61 cannot hold.
The Russell 2000 (RUT) holding as well. More notably, the RUT lead the SPX and COMP on Friday, which is significant. Seeing this keeps the bullish narrative alive with the RUT bouncing nicely off the bottom.
The Weekly SPX. Nothing there until either new highs are broken above 4713.57 or violated below the previous all time high at 4535.43. Moving forward, if the SPX rallies through year end or even produces new highs, 2022 is setting up to be a challenging one.
A look at Bitcoin (BTC/USD – Coinbase). As market technician Linda Raschke would say, Bitcoin is eating its tail. The tail being the December 4th flash crash candle. Since the candle is a Hammer candle with a long tail, subsequent prices will trade down to meet the flash crash low . Hence “Eating the Tail”. At this point BTC has a TD Buy Countdown @11. It’s two counts away from a price exhaustion marker of a TD Buy Countdown @13.
Ethereum (ETH/USD – Coinbase) has been vacillating above and below the 3889.05 TDST Support. This suggests a trading range around this level and it has been confirmed by the TTM_Squeeze indicator. While ETH is technically neutral, a rally from that level is a rally for other assets as well. Staying over positive, but the wall of worry is also looming large.
The daily S&P 500 (SPX) price flipped bullish last Monday, December 6th, and set off a rather robust rally. With the SPX back near highs, all sights are on the FOMC meeting on Wednesday, December 15th. The daily TD Sequential count is TD Sell Setup @5, and it just recorded a TD Sell Countdown @13, which signals caution next week. With the bullish backdrop, this should bring more opportunities to buy the dip as the lows are 4495.12 are presumed to be in. Trouble starts if small caps can’t get going…more on that below.
Small caps need to lead. Consider it problematic for the whole market if the Russell 2000 (RUT) cannot hold the 2154.62, the 60 and 120 minute TDST Support level.
With the recent pullback, the weekly SPX was unable to close below the previous breakout point at 4535.43. Rather the rally was good enough to price flip the weekly bullish. With the shorter timeframes in a volatile flux, the intermediate term remains constructively bullish.
The crypto markets are still messy. Since breaking the TDST Support level at 53,955.25, Bitcoin (BTC/USD – Coinbase) has an active TD Buy Setup @2, and a TD Buy Countdown @8. Unless BTC unexpectedly turns bullish above 53-54k, best practice now is to allow BTC to run the course lower until it reaches price exhaustion as defined by TD Sequential.
Ether (ETH/USD – Coinbase) is still holding above the TDST Support level at 3889.05 and that keeps the the overall crypto ecosystem bullish going forward. Opposite of that, new analysis is needed if ETH closes below 3889.05.
Now that the S&P 500 (SPX) has tracked lower, we know a counter trend rally is near through a TD Buy Setup nearing a 9 count. The obvious sign is a quick wholesale dump of stocks with a lower low either next Monday or Tuesday. If there is no lower low during Monday’s session, and the SPX price flips by closing above 4567, downside momentum has been temporarily halted. If the close is above 4608.03, the 15/30/45 minute TDST Resistance level, then the SPX is resolving to the upside and the counter trend rally is in progress. All together, one more lower low should set the seeds for a rally that lasts for more than one day. Later in the week, the SPX will try to find equilibrium before the next FOMC meeting.
Nasdaq Composite (COMP) is already there with a recorded TD Buy Setup @9. This strengthens the case for a snapback rally early next week.
The Russell 2000 (RUT) is extending lower with an active TD Buy Setup @9 + 3. Expect the TD Risk level at 2110.31 to hold in the expectation of an overall counter trend rally. Going forward, the RUT really needs to get going with more than an oversold bounce or more red flags will come out.
The weekly SPX has traded under the previous all time high at 4535.43, but closed the week slightly above it. That level is a good bull/bear proxy for the intermediate term.
This is the SPX monthly chart ending November 30, 2021. It has recorded a TD Sell Setup @9 + 9. It is now in the area of long term price exhaustion. This signals the consistent bull run since March 2020 will at the least start taking a breather.
Bitcoin (BTC/USD – Coinbase) is getting close to breaching the 53,955.25 TDST Support level. However, consider Ether (ETH/USD – Coinbase) as equals with BTC, If ETH can hold its TDST Support level at 3889,05, not all is lost for BTC. However, it is a negative if BTC closes with three lower lows under 53,955.25.
The S&P 500 (SPX) price flipped bearish last Monday, November 22nd, and the first and second confirmation of what will be a messy December occurred by breaking the 30 minute TDST Support level at 4602.92, and the next level 2 hour TDST Support at 4622.41. Before making an assumption the SPX will go on to record a TD Buy Setup @9, and correct 10%, a lot depends on what happens early next week by examining other time frames and other indices. More on that below…
Related indices such as Russell 2000 (RUT) and SPDR mid-cap (MDY) both broke out and subsequently failed. Currently, both indices have active TD Buy Setups @ 7 indicating price exhaustion should occur next Monday or Tuesday. This will at least provide temporary relief and support the SPX.
A close-up of the SPX through the 2 hour timeframe. With the VIX elevated above 20, shorter timeframes matter more. This chart will be the primary focus. The SPX on the 2 hour timeframe is allowed to make one more lower low before staging a bounce. If the bounce occurs on Monday, then the 2 hour SPX would need to start making strides to trade and close above 4622.41, the former TDST Support. If the SPX is unable to do so, that makes a bounce more likely next Tuesday as the TD Buy Setup can record a TD Buy Setup @9. Further bearishness occurs if the SPX cannot close above 4622.41 at all or if it does, trades below 4622.41, and makes another lower low. That would make the market more ominous longer term.
From the weekly SPX, it price flipped bearish to close the week. This suggests to be aware of more market declines especially when the buy-the-dip sentiment continues to prevail.
Since crypto is now correlated with equities, Bitcoin (BTC/USD – Coinbase) closing below its TDST Support level at 53,955.25 and Ethereum (ETH/USD – Coinbase) closing below 3889.05, the TDST Support are warning signs that BTC and ETH are trading into TD Buy Countdown territory. If they do close below their respective TDST Support levels with two consecutive lower closes, it will need to mount a recover by the third day or the odds drastically shift to the bearish side. That would also slide into the stock market. Next week is pivotal for all risk assets.
Since the bullish reversal last Friday, November 12th for the S&P 500 (SPX), the follow through was relatively weak. The base case is for higher prices until a TD Sell Setup @9 is recorded on Monday, November 29th. At that juncture, equities should finally cave and experience a swing lower. This will work in conjunction with an active TD Sell Countdown currently on a 10 count. Also note the proximity of the TD Trend Factor at 4754.75. TD Sequential counts recording price exhaustion near/at the TD Trend Factor will pose a formidable case for a bearish reversal. Given the weakening internals, if on Monday, November 22, the SPX price flips by closing below 4700.90, that’s a signal the market may reverse prematurely. Closing below the TDST Support at 4676.26 will support being more bearish than bullish.
The weekly SPX is still on path for a TD Sell Setup @9. Look for a high during the week of November 29th (TD Sell Setup @8) or the week of December 6th (TD Sell Setup @9). Given the range is over 2 weeks, we can hone on the sub-timeframes to narrow the picture. More on that below.
The 4 day SPX can record a a TD Sell Setup @9 on Monday, November 29th, the same day as the daily.
The 3 day SPX has already recorded a TD Sell Setup @9, but it is unperfected. What would be required is a tag at 4718.50 or higher. Note the TD Sell Countdown is two counts away from a 13. Again, the timeline for price exhaustion is in or around November 29th.
Finally, the 2 day SPX. It is finalizing a TD Sell Setup 9 + 9. This can be recorded on — Monday, November 29th. Putting everything together, a bearish reversal is near and the sweet spot is November 29th, providing the daily SPX continues on the track to record a TD Sell Setup @9. On the daily SPX, a bearish price flip on the daily suggests a reversal may come prior to November 29th.
Bitcoin (BTC/USD – Coinbase) couldn’t maintain it’s bullish measures and looks to be locked in a range for the near future. The current selloff is currently a TD Buy Setup @5, and is looking to meet up with the 53955.25 TDST Support. Look to BTC to stabilize there and it may take some work before it sees new highs. It’s acceptable for BTC to trade below 53,966.25 since the TD Buy Setup counts are already finishing. The worry would be if the inability to recover above 53955.25.
The S&P 500 (SPX) was able to maintain the bullish outlook by selling off early last week, but halting above the targeted 4622.41 TDST Support level (90m and 120m) last Wednesday. As a followup, last Thursday’s breadth was healthy and Friday’s intraday bullish reversal helped as well. The last hurdle is taking out the 30 minute TDST Resistance level at 4684.85, but that may just be a formality at this point. Expectations are to remain bullish through the new week. There is a 4754.75 TD Trend Factor, but it’s not a concern unless there is a concentration of TD Sell Setup 9 counts of various timeframes converging together near the level.
With strong momentum coming out of last September, it would be reasonable to assume the weekly SPX will record a TD Sell Setup @9. This will bring that timeline around late November/early December, setting up a choppy December.
Bitcoin (BTC/USD – Coinbase) was not able to flush lower and rather reached a new high before settling back in its trading range. The TTM_Squeeze indicator (bottom of chart) is still valid, and expectations is for breakout to the upside as FOMO in crypto and equity markets do not appear to be finished. Continued range trading while equities continue to make higher highs would require another look.
-Notations in “R” specify the current count has been recorded and will remain there until there is a recorded reverse TD Setup.
EXAMPLE: If the “SS” field is populated with a number, then the dominate count is TD Sell Setup. The corresponding “SC” and “CS” cells will give the depth of the trend with counts between 1-13 with 13 signaling a possible trend reversal. If the opposite fields, “BS”, “BC”, “CB” has a “R” entry, that means those counts have been recorded but there may be a risk TD Buy Setup (BS) can “recycle” into a new count. The “R” will remain until TD Sell Setup (SS) records a 9 count.
Trade Trekker 