FOR WEDNESDAY: (1/18) Lots of Yellen and Fed Gov. talks this week and they shouldn’t mean much but the chance of a March rate hike will probably push notes lower very soon. Draghi speaks at Davos but not much there either. Trump will get inaugurated and the issue will be how bad will the rioting be? Cycles are more jittery in general for the world over the next 2-3 weeks and any bad surprises anywhere are more likely to create a quick knee-jerk reaction. Trump’s dollar comments aren’t a deal killer but lower is coming.
MARCH E-MINI S & P 500
S&P ANALYSIS FOR WEDNESDAY: (1/18) Didn’t learn much on Tuesday. Market unlikely to take out 2266-67 and we have a bias this week for at least 2244 if not 2237, and in the end that’s not telling us much either. Deeper break possible to 2225 by Jan. 23. Our sense is that problems in DC may be hard on stocks. We do see Trump getting inaugurated but markets will probably get messy if violent clashes happen at the inauguration, and there appears to be too many factions of protestors and supporters to avoid a clash. Not sure the Beige book or Yellen really mean anything on Wednesday. Cycles are friendlier on Wednesday than we had originally thought.
OVERALL: Statistics around elections suggest a rally pausing about 2 weeks after inauguration and that fits with our cycles suggesting an early Feb. high. In the end the anxiety and uncertainty cycles are increasing and China will continue to get worse and that may just be too much for the market. Is the honeymoon over with Trump? The reality is hitting that what may be good for the populace with returning jobs and lower drug costs may not translate into higher profits for corporations, and that’s the Big Elephant in the room that Wall Street is sensing.
WEEKLY CHART: We still favor the pattern suggest a 100-point decline into March but will get 1-2 more new highs first? If not a larger 4th-wave pullback to 2183 on futures may have started. More inclined to expect 2332 on cash complete probably by the first week of February. Strength in Nasdaq is suggesting that sector rotation to oversold techs that didn’t benefit from Trump bump as much are coming more alive now, and very clear new highs there remind us not to get caught up about profit-taking just because 30 DOW stocks are at 20,000.
BIG PICTURE: (1/9) Patterns suggest two new highs to 2330 into early February before we really have to worry about a 100-point pullback that may happen into the spring. Feb. 9-March 30 may be the vulnerable period for that to happen but still could see 2380-2400 this year. If anything, any problems with China are likely to create big economic sneezes around the world and spillover problems, and Europe is a mess this year and contagion may cause problems the 2nd half of the year and possibly in February/March. For now, until 2332 on cash gets completed, we can continue to trend trade and buy dips.
NEAR TERM: (1/6) We still would expect new highs toward 2296 with additional resistance at 2330. It would seem that 5-wave up from the election low would be complete at 2330 and set up larger fall. Eventually we might get a 110-point correction from 2330 to 2220 and could take a few months which we need to confirm. Cycles in February seem troubling and March is often seasonally lower. That means that much of the current rally will be over in January. Still, it seems that 2380-2400 is very likely by June and then would be followed by a pullback to 2020 later in 2017 and 2520 might take until 2018 to happen.
MONTHLY CHART PATTERNS: 2420 or 2520 isn’t out of the question before this bull market ends and it takes a long time to turn an ocean liner around in so V-tops and crashes are not to be looked for and publications that steer you that direction are being too sensational.
CYCLES OVERVIEW: Lower into Jan. 18; higher Jan. 19; lower into Jan. 20; lower into Jan. 23.