Downside Scenarios - Market Update
Premium Section: ARKK Setup
The market is experiencing a normal controlled pullback at the moment. We warned our subscribers here and here to protect profits as we saw that the market internals were deteriorating as our Cycle Forecast pointed to a pullback beginning December 6th to December 10th. The chart of the NYSE Advance/Decline Line below shows deterioration in breadth after touching the Upper Bollinger Band (green). The RSI is heading lower, as the MACD just made a bearish crossover, thus continued weakness is likely going into mid-December.
As Dumb Money bought the dip, Smart Money is waiting for a deeper pullback to re-deploy capital.
The Fear & Greed Model shows an increase of fear at the moment as investors are concerned with the FOMC meeting on December 18th.
The S&P 500 hit resistance at the $609 level and pulled back to the 9 EMA (green). With the McClellan Breadth Oscillator trending lower and the VIX Curve (VXV/VIX) at 1.20, we believe that the pullback will continue. Look for the McClellan Breadth Oscillator and VIX Curve to turn up from lower levels to signal that the pullback is over.
The prior high around $600 is a strong support level as it has confluence with the 21 EMA (yellow) and a high volume node on the Volume Profile (chart above). It would also be a 38% Fibonacci Retracement of the Thanksgiving Rally, which also coincides with the Anchored Weighted Average Price from November 19th (chart below)
We expect this level to hold, given the confluence of support factors. However if it does not, we see strong support at the following levels:
The 50% Fibonacci Retracement at $596.51
The 62% Fibonacci Retracement at $593.56
The Central Pivot Point around $591
The 50 SMA (red) around $587
The S1 Pivot Point at $579.
Consumer Price Index (CPI) will be reported tomorrow and Producer Price Index (PPI) will be reported on Thursday. These reports can really move markets so expect volatility over the next two days.
In the Premium Section we’ll go over our Cycle Forecast for the S&P 500 to give us an edge and know when to start buying. We’ll also go over a setup in ARK Innovation ETF (ARKK).
Note that we will be providing our 2025 Annual Cycle Forecasts for our 13 Main Asset Classes (SPY, QQQ, IWM, DIA, VIX, TLT, LQD, HYG, US Dollar, Oil, Gold, Silver and Bitcoin) to Founding Members on December 20th. To get this, consider becoming a Founding Member and joining our community.
