The topping process in the major US stock markets is turning out as to be extremely tenacious. For several weeks Dow Jones, NASDAQ-100 & Co. has sturdily been refusing to swing into the yet ongoing corrections of the other globally important stock market indexes.

In the US markets we’ve been short on weekly base since the middle of March 2013: 1462 and 14500 respectively. Please pay also attention about this to our trades on our different performance sites:

http://www.gunner24.com/trading-performance-us-stock-markets/

The correspondent weekly setups signaled these short-engagements according to their resistances. But frequently the signals in the weekly time frame are overruled by the monthly time frame.

At the same time two important Gann Magnets are playing their last trump cards.

Since February 2012 it was rather understood how long at least the actual bull-run had to keep up. It was until April 2013:  

 

 

In the important monthly 5 Candle GUNNER24 Down we were shown that the 2nd double arc was dominating the way up. Since the 666.79 low in March 2009 it has been backing the market over and over again forcing it up irrevocably. The influence of the upper line of the 2nd finishes in April 2013. Thus, 14 months ago we were able already to nail down an important topping phase. Here’s the actual chart:  

 

 

April and May 2013 are situated at the intersection point of the upper line of the 2nd with the time axis. The price is in total unison with the time there. According to the GUNNER24 Rules technically such an occurrence points pretty reliably to either an important top or an important low. Otherwise the monthly setup is depicting perfectly some important changes. The March 2009 low is lying exactly on an important time line. In the center of the third passed square. The intersection of the Blue Arc as well as the upper line of the first double arc with the time axis produced some important lows in 2010 and 2011.

The influence of the upper line of the 2nd is keeping the market up. Not before the influence of the upper line finishes the market will go over to the expected correction. Now, maybe the top was made in April already not being allowed the S&P 500 to fall before May 1, or maybe, since the May candle is also still scraping in the sphere of influence of the upper line of the 2nd a dip upwards is due. For a possible May exhaustion and our perfect short-entry on monthly base we’ve got to consult the actual monthly 3 Candle GUNNER24 Up:

 

 

In the GUNNER24 Forecasts of 04/13 I already helped you in detail to understand this chart. In the end, since that last analysis there haven’t been many changes. The horizontal resistance thrown up by the center of the just passed square (1595) may be responsible for the fact that the April 2013 high at 1597.35 was the next important high of the actual bull-run. Or be it that May – because the market might cogently follow the lower line of the 2nd in the monthly 5 candle down setup above – will still have to exhaust a little bit.

An important GUNNER24 Rule says: After the 3rd double arc had been taken upwards in January 2013, after a back-test during several months, in the monthly time frame the upwards target is the lower line of the 4th double arc!

The lower line of the 4th is at 1625 for May 2013. At the moment the lower line of the 4th is the strongest up-magnet. So there is thoroughly a chance that May will have to go a little higher yet than the actual 1597.35. Moreover the following observation keeps being valid:

Adding up the very first up-leg that started in March 2009 at 666.79 and topped in April 2010 at 1219.80 with the important low of October 2011 we’ll get exactly 1627.78 index points as a possible target of the actual wave.

1219.80 – 666.79 = 553.01

553.01 + 1074.77 = 1627.78

So the strongest up-magnet for May 2013 is situated at 1627.78-1625. After such a powerful up-wave it’s really offering itself that the market finally wants to top now being willing to rebound unambiguously from the strongest and most important monthly resistance. Into the bargain enter the seasonality aspects. The keyword is: "Sell in May and go away…"

Exactly one year ago (GUNNER24 Forecasts, issue 04/29/2012) I referred to a new study of the US analysts Yale & Hirsch concerning the Dow Jones. They searched out the following for the years 1950-2011:

A speculator who in 1950 invested 10,000 US dollars into the Dow Jones would have earned 619,071 US dollars provided he was in the market only in the months of November until April. However, being invested in the months of April until October the speculator would have produced losses of 1.024 US dollars within 62 years.

The reason for this very unambiguous cycle seems to be the pronounced rhythm of the Americans concerning the delivery of their tax declaration until March 31. The pending additional charges of the IRS make the tax payers sell a part of their stocks in May to settle their tax liabilities.

In the year 2012, too, from April to June a – usual – seasonal weakness occurred. From the April 2012 interim top to the June 2012 low the S&P 500 altogether corrected by an 11%. And that’s about the dimension of the correction move I’m expecting for this correction:

We’ll still go short at 1627 MIT (market if touched), monthly position. I expect at least 1460 as the low of the pending correction and perhaps even 1345 as the main target of the imminent correction.

In the course of the past weeks some readers asked me to go into the NASDAQ-100 once more. With pleasure I fulfill these wishes:

 

 

From my point of view the NASDAQ-100 is certainly not a hot spot market. It’s been struggling along for months. It doesn’t truly either rise or fall – simply moving sideways. The lower line of the square at 2725 is a strong monthly support. For eight months it has been slowed down at 2840 by the horizontal support starting from the intersection point of the upper line of the second with the beginning of the setup.

All the same it is still the precursor for the Dow Jones and the S&P 500. The NASDAQ-100 is the market with the clearest indication that the bull-run has not at all finished yet, you see. That’s to say it’s still got to work off its next upwards target of 2995 index points. Probably that is going to last several months yet. The index is not likely to achieve that target before autumn or by the year-end of 2013.

I could imagine that April 2013 is marking an important top since April is trading exactly on the important time line beginning to correct then as well – during two to three months, newly down to the 2725 horizontal support.

But I think that April 2013 really manages now to close narrowly above the horizontal resistance of 2840. Maybe it will at 2850, and that’s going to be another buy signal on monthly base confirming that the next important up-target in the setup will be reached, the 3rd double arc! 3000!!!

 

  

 

 

 

Be prepared!

 

Eduard Altmann