Yesterday I showed the daily, weekly, and monthly chart of the SP500 index. Today I want to look at some ranges of the ValueLine Arithmetic Index (VLE).
The 2002-2007 range shows price back above the 25% retrace line – which is much higher than other indices. The 50% time cycle is in mid-December which shows a possibility of a big drop into the 50/50 point in the next 60-90 days. The flip side of that scenario is if price remains above the 50% price level, then the market will be signaling a bullish recover in the second half of the time cycle.
The initial pop in 2002 led to a significant correction in time which ended in 2005. The chart below shows the time frame following that correction. The downside of this chart is that price is well off the 2007 high at the 100% time cycle. This setup signals weakness going forward into the longer term.
The bounce off the 2007-2009 bear market remains above the 2×1 angle which is very strong. Until price breaks this angle (which could happen this week) I cannot be bearish on the market. I do know that the market will correct soon. It has been over 200 days from the March low and needs a rest. But the internal metrics show the market to be nearing oversold and I expect another bounce soon. If price does not make a new high on the bounce (or only marginally so) before becoming overbought again, then I will start to consider the short to intermediate term bearish side.
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Tags: Market Outlook · Value Line Arithmetic Index (VLE)No Comments
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