Wave & Volume Direction, Consistent & Persistent

Since last Thursday, stocks have turned up in price on lower volume. A clear sign that there is a topping process going on.

S&P 500 index prices have traced out an A-B-C pattern. Wave (C) of Primary wave 2 started at last Thursday’s low and has progressed as an impulse wave. The S&P mobilized and reached 2980.29, meeting the principal objective at the 2972-2986 territory. A higher potential likewise exists at 3130-3238, yet Minor wave 5 of Intermediate wave (C) looks complete or almost complete, which makes the chances low that the index will push much higher. For the DJIA the target areas are 25,018-25,865 as well as 26,838-27,139, if a further completion higher of wave (C) is needed. The fact that the DJIA and the Russell have not hit new highs is a clear sign that wave (C) is probably complete.

The Awesome Oscillator indicator (Momentum)

The Awesome Oscillator (AO) indicator, a momentum measure, found in the below part of the following chart, has since the start of wave (B) up been decreasing. It’s also been in decline since April 29.

The momentum weakness is also reflected in the volume trends seen in the following charts of the S&P, DJIA, and Russell 2000.

S&P 500 – Wave & Volume Direction

DJIA – Wave & Volume Direction

Russell 2000 – Wave & Volume Direction

Stocks in aggregate appear to be working through a topping process. Without new highs in the DJIA and Russell 2000, the expectation is that all three indexes will soon start to fall with a pick-up in volume. The view is supported by the wave structure, momentum, and volume from the April 29 highs and the start of the bear rally in March.

Overall, further price highs and a continuation of the bear rally are unlikely. Patience is important here just like everything else in life.

Here is the spreadsheet supporting the above charts: Wave and Volume 

 

 

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