S&P 500 likely to submerge in May

Recalling the past weeks, our attention is attracted by the S&P 500 having gone just sideways for the whole March and April as well. The February close was at 1859. On Friday, the market closed at 1863. Even though there have been several attempts these months being even made three new all-time highs, nothing is really advancing because positive and negative news took cheerful turns. Depending on the protagonists’ mood, the prospects are being assessed between worse and more favorable coming to the fore the Ukraine conflict again and again.

The tops of the last weeks were sold off but not vehemently. The different declines after the tops were bought heftily at important weekly and daily supports. I had not expected exactly such a performance. The consolidation at the highs during the last three weeks – in chart-technical respect most healthy and promising – is a first indication that the summer correction in terms of price may turn out much weaker than already at the end of March, I had expected it would:

On 03/30 I was still working on the assumption that after attaining and working off the first square- line resistance in the current ruling daily up setup of the S&P 500 the first sell-off wave with main target 1600 would start pretty swiftly to continue the pattern of an average midterm year that had been reflected so far:

But - instead of beginning to turn from mid-April, up to now the market has held the bull market highs. The first selling wave of the summer correction has failed to appear so far. In spite of the negative indicator divergences, obvious for weeks in the weekly time frame, the hedge funds and the rest of the Smart Money “refuse” to unleash the sell-off.

My conjecture is now that the hedge-funds are having the plan to keep the market above at least through April 31, but more likely till May 7-9, 2014 before it will be allowed to refuel.

Is it really that simple again that on May 1st to a T the “Sell in May and go away” will start???

Since the market succeeds to maintain itself up for such a long time, the summer correction is also likely to turn out less deep and long than I had expected. New main target is 1700 instead of 1600. The duration of the correction is supposed to be even lower than the midterm year emits. As early as at the beginning of July the summer correction will be likely to finish. Then the market will have 6 plain months of time to reach its 2000 points through December 2014.

In the daily time frame – I think – it’s still going to take a little time till the decline starts respectively becomes obvious for everybody. Regarded from the indicator’s side also in the daily time frame the RSI and the MACD are in complete concordance now with some shapes of the weekly time frame. In both they show negative divergences:

From the pattern, I guess a complete Head and Shoulder Top is to be identified. With this topping pattern, we’ll straightly go on working in the GUNNER24 Analysis.

Even a rare Diamond Top might be molded:

We’ll see it all in hindsight…

For my taste, the SSHSS topping pattern is fitting best when it comes to the position of the important magnets in the daily time frame:

So, being asked why the market did not submerge below the 1800 finally, after working off the 1894, certainly I can explain you unambiguously with a weekly GUNNER24 Gann Angle Support – see next chart. But the fact that it sufficed again for attaining the 1884 in the subsequent rebound, I can only blame the exaggerated optimism of the market participants that don’t recognize the signs/seasonality. That optimism frequently appears at important tops. It seems to be related with the phenomenon of the will to miss the next up-leg by no means when the market wants to get started again.

Well, be it as it be. At any rate after the April top and the current 1897.28 all-time high it came to a hefty selling wave ending in a combined daily and weekly Gann Angle Support at 1815 by the middle of April. Then the market was bought severely. The most surprising for me was theat during this rebound the 1*1 Gann Angle was re-conquered. That really speaks of the inner strenghth of the current bull run. And in the end it means that the expected summer correction will turn out less long and less hefty.

Hence, with last Tuesday through Thursday, the S&P 500 shaped its first right shoulder. I suppose the following to happen: After a brief 2-4 day reset that may reach the important daily Support Gann Angle = 1836 not later than Thursday, but will probably turn at 1850 after just 2 days, it will go up again, namely into the 1880 area, before there – around May 7-9 – the next right shoulder will be molded, and the first double arc resistance worked off as well.

In my opinion, the first double arc can and will be attained and worked off. It seems to have a magical magnetic effect to the price. In the Low/High GUNNER24 Setup above it is now the only Gann Magnet that will be strong enough to release the summer correction.

If the S&P 500 succeeds in closing just 2 days within the lines of the first in May, I – being a German – will feel pretty dizzy, frankly and plain-spoken. This would be an unequivocal indication that the summer correction will be cancelled respectively turn out as a mini correction. Such closings are even a hint that the next hefty up-leg is due...

For there is another important rule, actually always followed by the Wall Street. It reads. “Buy when the cannons rumble”. The only and truly solid ground for this rule to be effective soon is the EU/Russia/Ukraine conflict…

In this context – the start of a possible greater armed conflict might kick off a new hefty buying wave in the US stock markets – we have to consider imperatively the signals of this weekly 13 Candle GUNNER24 Up Setup:

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