• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Trifecta of Trouble
Stock

Trifecta of Trouble

by April 5, 2024
by April 5, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

The Markup Phase of a Bull Market is glorious to behold and participate in. But they do ebb and flow. The bullish run in the major stock indexes has been persistent in 2024. We often discuss the quarter-end effect for stock index trends and the upward trend has persisted into the end of the first quarter with diminishing momentum. Let’s turn our attention to some classic and powerful Wyckoff chart studies to determine the present position and possible future direction of the indexes as the second quarter begins.

S&P 500 Index with Wyckoff Markups. 2021-2024

This daily chart of the S&P 500 should be familiar to regular readers. It is our Wyckoffian record of market structure going back to the bull market peak of 2021. It is a real-time journal of our Wyckoff Analysis through the Distribution Structure, the Markdown, the Accumulation Phase of 2022-23 and now the Markup. The Markup finally exceeded the rangebound condition of the Accumulation with the advance that began in October of ’23. We had been making the case for the unfolding Accumulation here and in the Wyckoff Market Discussions (every Wednesday with Roman Bogomazov) throughout the Accumulation period.

Recently the S&P 500 climbed above the well defined Markup channel into a Throwover and OverBought condition. This OverBought / ThrowOver has arrived as the First Quarter was coming to a conclusion. Thus suggesting ‘Window Dressing’ shenanigans by institutional types. Often strong trends in the indexes (both upwards and downwards) can follow through and persist for a few weeks into the new quarter. We will watch for a change of character in the behavior of the indexes in the Second Quarter. An example of this would be a reversal of the S&P 500 back into the upward striding Trend Channel. A sudden and sharp break back into the channel would be labeled an Automatic Reaction (AR) and would represent an important confirmation of the upward trend exhaustion. Until such an event the upward trend must be respected. 

We expect the upward stride of a Markup phase to be broad and strong and such is the case here. Recall that Accumulation is a zone of deepening pessimism where the public and institutions become progressively more cautious. Such caution manifests as portfolio defensiveness (higher levels of cash, lower beta stocks and more bond type assets). Meanwhile the ‘Composite Operator’ types are absorbing stocks with good growth and value features for the next bull market. This puts stocks in very strong hands. This Supply to Demand imbalance can result in stock indexes launching higher following the preparation phase of Accumulation. As Accumulation concludes broad pessimism is observed in the extreme pessimism readings of various sentiment gauges (which were profiled in Power Charting and on WMD at the time). 

Point and Figure Price Objectives

S&P 500 Point & Figure Study. January 2023

This PnF legacy chart was first profiled in January of 2023. It estimated the downside potential of the bear market, which was fulfilled with a Selling Climax and a Secondary Test. The Climax initiated Accumulation (detailed in the vertical chart above) that continued throughout the second half of 2022. In January of ’23 the upside of the nearly completed Accumulation was estimated in three segments. The first two segments have now been fulfilled. Note the Count Line was 3,775 and the $SPX was at 4,000 when this projection was made and published. Pessimism at the time was such that this study was met with much disbelief, a very good sign for the higher prices yet to come as the indexes began climbing the ‘Wall of Worry’. 

Below is a PnF update with the Markup phase. Second phase price objectives are now being fulfilled. New price highs above the 2021 bull market peak have markedly swelled bullish sentiment. Analyst types are now rushing to make projections for the $SPX above 6,000 and even 7,000. This bulge of optimism is a warning sign that caution is warranted. 

S&P 500 Point & Figure Study, 50 Point Scale. April 2024

  

The current interpretation of the 2022-23 Accumulation shows the robust Markup following the Accumulation (50 point scaling slightly changes the price objectives). Once the downward trend channel was broken and tested from above the upward stride was dramatic. Index prices have now Upthrusted the bull peak of 2021 where a Backup to old resistance is likely.

Trifecta of Trouble (a summary)

1)        The S&P 500 is now above the upward stride of its trend channel. This OverBought condition could lead to a correction and would be confirmed by return into the channel. Old resistance from the 2021 bull peak would be a price level to expect support to develop. 

2)        Point & Figure Price Objectives generated in early 2023 are now being fulfilled. Watch for classic signs of stopping action such as an Automatic Reaction and range-bound sideways trading. This would generate PnF count potential for either ReAccumulation or Distribution. Higher price objectives remain and there is good seasonality in the second half of this election year. We will watch the tape for further indications.

3)        Sentiment has flipped from bearish to bullish. High readings from the NAAIM, AAII, CNN Fear & Greed and other important gauges are frothy. This is normal and typical in a Bull Market as the upward stride of the trend ebbs & flows. Corrections of the uptrend bring back caution and even pessimism which builds cash for higher prices in the future. 

A dynamic Markup is very exciting, important, and not to be missed. Corrections along the way are inevitable. They often represent rotation of leadership as the economy matures and changes character and that appears to be the case here (subject for future WPC blog posts). 

All the Best,

Bruce

@rdwyckoff

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. 

Announcement

Wyckoff Market Discussion – Free Open Door Session. Wednesday April 10, 2023, 3pm PT 

Join Roman Bogomazov and me for a FREE session of the Wyckoff Market Discussion. From a Wyckoffian perspective we discuss the current state of key financial markets.

Register to attend this free session (CLICK HERE)

To Learn more about the WMD series (click here)

You Might Also Like
  • Why the MACD Pinch Play is So Valuable
  • Forex Secrets: How to Profit When EUR/USD Goes Nowhere
  • Top Ten Charts for August: Best Healthcare Stocks for August 2024
  • Markets Surge Post-Election: Is It Time to Go All-In?
Share
0
FacebookTwitterPinterestWhatsapp

previous post
A California bill would let workers ignore their bosses during off hours
next post
Silver’s Surge: Can It Reach $50 an Ounce This Year?

You may also like

How to Spot a Golden Mining Opportunity Using SCTR Reports

September 6, 2024

Sector Rotation is Giving Conflicting Stories!

October 16, 2024

The Final Episode: Jesse Livermore Insights and Holding ‘Dead Money’...

November 29, 2023

2024’s Big Bang: A Deeper Dive Into the Hindenburg Omen

December 20, 2024

Where is the Market Finding Joy?

March 20, 2023

S&P 500 Dives After Failed Test of Price Resistance; Bears...

March 29, 2025

Six-Month Period of UNfavorable Seasonality Begins Next Week

April 28, 2023

The Case for a Tactical Stock Selloff

January 17, 2024

Silver: An Undervalued Monetary-Industrial Hybrid

March 15, 2023

Tech and Staples Leading Choppy S&P

March 27, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,630 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Stay Ahead of Tariffs: Essential Chart...

    February 14, 2025

    Week Ahead: NIFTY Stares At Scaling...

    December 3, 2023

    Week Ahead: Nifty Creates Resistance In...

    June 30, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here