Stock markets aiming to find their course

After the pronounced phase of weakness in June, lately the US markets achieved to calm down again. Thus the first impetus of the correction is cushioned for the time being, so the short- and medium-term trends switched to neutral now. So far July has followed its course in accordance with the seasonality. Correspondingly July is likely to perform as a positive stock month in general terms. In the process the first half of July uses to perform strong whereas the second half tends to be weak often triggering the starting signal for the "normal" extended summer correction.

In terms of cyclicality August and September are rather weak stock months. Accordingly, I expect the final low of this correction to happen as usual (here is where you’ll find the last extensive S&P 500-Analyse) by the middle of August at 1548: 

During the June correction the S&P 500 moved back to the Support Gann Angle # 1 – green circles. The June low is at 1560.33 index points. And from the Support Gann Angle # 1 the market turned upwards. The last week candle, first July week candle, is showing a low at 1604.57. The 1605 are not only a visible horizontal support in the weekly chart but also the actually most important monthly support. Please mind about this also the immediately following monthly 3 Candle GUNNER24 Up Setup. So the 1605 are a combined weekly and monthly support. That’s what makes it very strong on the one hand, but on the other hand we can also use it as a trigger mark as far as reaching the correction target at 1548 is concerned.

Concretely: A weekly close beneath the 1605 in July will confirm the correction target at 1548 by the middle of August 2012. If then subsequently happens a weekly close below the Support Gann Angle # 1, the 1548 downtarget – the third test of the Support Angle # 2 – will be finally activated.

Since the cycles identify July as to be a strong month, certainly there are chances, too, that the S&P 500 wants to produce another all-time high till the middle of August. The trigger mark for this outcome will be the final re-conquest of the 1*1 Gann Angle.

The 1*1 Gann Angle was clearly broken downwards during the June correction, being activated the Support Angle # 2 as the next important downtarget. A re-conquest of the 1*1 Angle would be an extraordinary demonstration of power, of trend power. According to the Gann Angle Trading Rules technically such a re-conquest is impossible. If this succeeds, wow… The 1*1 Gann Angle will be at 1635 next week. According to the rules, after a thoroughly allowed/normal back-test of the 1*1 Angle the market will be likely to rebound again from there beginning the next strong correction wave (wave C of an ABC-correction marked above in the chart by a red arrow).

But, since next week will still be pretty likely to be strong due to the cyclicality we’ll almost have to work on the assumption that a weekly close above 1635 will follow.

I wouldn’t yet interpret this first possible weekly close above the 1*1 as a buy signal. It would take two consecutive weekly closings above the 1*1 to signal that the 1*1 would be finally re-conquered. If such an up-break succeeds some new all-time highs shall have been reached – 1702 at the 4th double arc!

A bird never flew on one wing. That’s why the corrections in the uptrends use to have two wings: It’s the first A-wave and the second C-wave. But what will be the meaning if the C-wave fails to appear, if the coming two weeks crack the 1*1 weekly Gann Angle and the 1635?  

Wow. On the one hand that would be a new buy signal on weekly base. Because of the ongoing upwards momentum this might/would have to lead to the highest monthly close ever. If the July close is above the 4th double arc (technically a strong natural resistance) and thus near the all-time high, according to the GUNNER24 Trading Rules we’ll have to buy.

We’ll buy a July close above 1680 with main target 1875! First target would be in this case the horizontal resistance that starts from the intersection point of the lower line of the 4th with the beginning of the setup = 1730! No stop-loss for the moment.

If the second half of July performs rather weakly being however the July close within the lines of the 4th we’ll have the first indication that the 5th double arc in trend direction wants to be reached. The final upwards-break of the 4th double arc is only postponed in this case being due /having to happen perhaps in September/October 2013…

A July close above the 4th double arc would be the unambiguous confirmation that the 2*1 Gann Angle shall carry the market up to the final target of the entire monthly 3 Candle GUNNER24 Up Setup = 5th double arc at 1875 points until May 2014!

Since the second half of 2011 the 2*1 Gann Angle has been giving the gradient angle of the uptrend. The market is following its course oscillating around. Please have a look at the actual July 2013 low. With its 1604.57 points it is exactly situated on the 2*1 Support Angle.

That’s why it would take a weekly close below 1605 in July to become a trigger for reaching the 1548 downtarget…

I received many, many mails last week congratulating me for the nearly perfect bounce target in gold. Many readers seem to have used those 1258-1262 for a short-entry catching something. The weekly high was finally at 1267:

But last week I really did extensively go into the actual sentiment, the expected sell-off levels. I dedicated most attentiveness to the "time" trying to work out the moment of the low. In the final analysis two spans turned out to be possible. A) July 05-08 and B) July 09-15. In the end option A expired without producing a new low. So let’s check the B-option again. For that, best we zoom into the actually very most important GUNNER24 Setup – the weekly 13 candle up, well-known to all of us:

It’s really interesting there now. Last week showed the lowest weekly close of the whole correction – negative! That augurs a bad start into the week. Technically the negative momentum is likely to go on at least for three more days leading to the final low of the correction as analyzed last week.

But really glaring is the fact that Friday saved itself above the 1222 again after having reached 1206.90 in the low! We remember – to be read up here and here – how important the 1222 are on monthly base. 1222 are the actual monthly support. Underneath the next important monthly support are the 1172 (minimum sell-off target). If gold had finished last week but 2$ lower – at 1220 or so – gold would have produced another sell-signal on weekly base. But that was avoided. If gold opens now approximately where it closed on Friday – at 1221-1223 – the opening would be exactly at the resistance of the lower line of the 4th! But each up gap from 1225 upwards would skip over the resistance of the lower line of the 4th in terms of time, theoretically allowing a quick, tough rally. But if the market opens with a down gap at about 1220 there’ll be the possibility that gold at first will fall rapidly during 1-3 days permitting consequently some new sell-off lows.

You certainly recognize my incertitude on the possible outcome and the possible direction… But that’s exactly what we’re shown by the setup. Next week gold will trade exactly where the resistance of the lower line of the 4th runs out. That’s where the extremes are in the aiming position. Gold is going to trade on an important time line next week, on the transition from one square to another.

Corresponding with my discoveries and decades of investigations there are only 2 rules when the markets are trading on important time lines: A) Expect wild, wild oscillations (volatility). When the markets are trading on important time lines they are in a vacuum as it were. Important supports and resistances are being canceled at the important time lines. They break like twigs being re-conquered easily however – exhaustion! And B) at important time lines often some important tops or lows are being produced. Since gold has been falling for months, it seems to suggest that we’ll have to expect a final low next week. At which mark that happens, hmm, next week gold may easily fall to 1172/1140/1122. But from one of those supports subsequently it may easily bounce as well, by 50$ or even 100$.

If next week doesn’t perform in a volatile way but calmly and without extreme ups and downs the final sell-off low won’t be likely to get in before the middle of August. As analyzed last week already, it will be rather at 1000$!

Be prepared!

Eduard Altmann