Protect Profits - Market Update
December 2024 Cycle Forecasts for SPY, QQQ, IWM, INDA & EWG
The market had an excellent Thanksgiving Rally as we expected. That leads us to the question…does it have more gas in the tank for continued upwards movement?
This week is packed with economic data, setting the stage for potentially significant market moves. Key events include Fed Chair Powell's speech on Wednesday at 1:45 PM EST and the Non-Farm Payrolls report on Friday, released before the market opens.
The S&P 500 (SPY) is in an uptrend above the 9 EMA (pink) and 21 EMA (blue) and closed at all-time highs today. However the market internals do tell us that the market is frothy right now and ripe for a pullback. Looking at the chart below:
Global Liquidity (black line) is declining despite the rally.
Net New Highs are declining into the highs.
The McClellan Oscillator is showing bearish divergence.
The VIX Curve (VXV/VIX) is at 1.23, and usually the market runs into resistance at the 1.20 mark.
The Equity Put/Call 5 SMA shows heavy call option buying, telling us that there is rug-pull risk.
As long as the SPY stays above the prior high support level of $600 and the 9 EMA, the market can go higher and there is no reason to get bearish. We just recommend that people raise their stops to protect profits in case certain cycles cause a pullback (discussed in the Premium Section).
Next question…how high? SPY has a tendency to hit the R1 or R2 Pivot Points on up-months. Note that in November it hit the R2 Pivot Point, which served as resistance. The December R1 Pivot Point is at $614.64 and the R2 Pivot Point is at $626.72. And we believe that one of these pivot points will be hit before year-end.
Final Question…will we get a pullback first? Looking at the chart above, the Slow Stochastics indicator is in overbought territory, but has not yet made a bearish crossover. A time for profit-taking may come soon. RSI is at 67, which is almost at the overbought zone of 70. The MACD Histogram is still showing bullish momentum though. When momentum slows down it may be time for a pullback to support.
Furthermore, Smart Money definitely thinks a pullback is coming, as they are at oversold levels, waiting for a dip to re-deploy capital. Meanwhile Dumb Money is taking profits at the high. With Smart Money waiting for a dip and Dumb Money taking profits, who is left to pump the market higher?
Our SPY Cycle Forecast below shows us that the time to protect profits is here.
Disclaimer - All materials, information, and ideas from Cycles Edge are for educational purposes only and should not be considered Financial Advice. This blog may document actions done by the owners/writers of this blog, thus it should be assumed that positions are likely taken. If this is an issue, please discontinue reading. Cycles Edge takes no responsibility for possible losses, as markets can be volatile and unpredictable, leading to constantly changing opinions or forecasts.