JRM Market Update for S&Ps and TSLA – JenkinsRM

JRM Market Update for S&Ps and TSLA

In this update I’m going to touch on a few things I’m noticing about the S&P 500 and Tesla after examining some cycles.

In the daily chart of the S&P 500 below I’ve marked the 8-day cycles that have been playing out recently.  There has been a very nice rhythm to them.  These cycles are significant for highlighting the relative turning points in the market as far as directional timing goes.

S&P 500 E-mini Futures – Daily Chart

Starting with the left side of the chart, we can see the market made a double-top before dropping 8 days and then had another cycle down into a low.  It then bounced higher for 8 days before another 8.6-day cycle into a low followed by another 8 day move back to the high.   From here, the market actually made two cycles down to a new low.  What’s interesting now is that it appears that we may be getting two cycles to the upside when we look at the most recent candles.

There are actually two different ways to consider the start of the most recent cycle.  It’s never an exact science.  You could either begin the 8-count from the Dec. 26th intra-day lows to be consistent with the previous cycle count, or you could begin from the bounce to the 1-count that followed the major low.  In the case of the former, today would mark the fifth day of the current second cycle while the latter would put us around the third day of the second cycle.  Regardless of which you choose, the important takeaway here is that from a timing perspective, we could be getting close to a key turning point in the market.  That turn could correspond with the market rising above 2600 and testing the upper bands later in the week.

Taking a look at the weekly chart below, the most recent cycles have seen a 4 week drop in the market followed by sideways movement and then another 4 week drop.  Now we are only 4 weeks off the most recent lows and the cycle still has room to come back up.  The cycle is doing a good job of tracking the 8.6-count so it makes sense that it sits around the half-way level with a 4 week bounce off the lows.

What I’ll be watching for into tomorrow is can the volatility pick up and what does the volume look like if it does?  From a price perspective, the VIX is telling us we’re close; we’re seeing futures trading around the 18 -19 handles and implied volatility has really come down to levels where we’ve previously made significant lower highs throughout the October – December period.

From a price perspective, we notice with the swingline on the daily chart above that we haven’t closed below the prior candle’s low yet.  Getting that confirmation would be another indication that the market may be ready to roll over.  We would also need to see price break the 8-period moving average.

The 30 minute chart shows a series of higher lows, with the two most recent forming an interesting zone in the area of 2560-2570.  We also have Pi in this area too.  These lows from overnight and this morning, along with Pi, are pivotal.

If this 2560-2570 zone starts to give way to the downside, we would definitely be looking for more selling pressure to follow.

When the market recently made a low in the area of 2540, it held the 200-period moving average on the weekly timeframe.  This level may be seen again on a sustained move lower.  Pi comes in below that in the area of 2158.  On the monthly timeframe, the bottom of the Wave Formation Bands comes in around 2166 which would be the first target on the downside.  If the market does make a lower high and then breaks the 200-day moving average, then the next area we would be looking at would be near Pi at 2150.  It may take until March to see a move into this area.  We would look to use bounces to lower highs to be sellers as the market is in a downtrend overall on the weekly timeframe.

Regarding Tesla, I thought it was interesting to note how well that the cycle has been playing out with price.  These cycle combinations show price falling to a low in March after peaking in December.  Since we expect the overall market to reach its lows in March as well, I could definitely see this playing out.

On the graphic below, I’ve marked where we saw the cycle peak in December and we’ve got another move lower through January 22nd possibly into this February-March timeframe before another pretty big cycle up for Tesla.  We did see price peak in December with the cycle, and the low before that in October also came with the cycle, so it has been playing out well and is worth watching from here.