Posted by Danny on January 23, 2017
Not much has changed since we looked at the S&P 500 a few weeks ago. The market continues to chop around in a narrow sideways range and the Dow still hasn’t made it above the 20k barrier:
The bearish divergence in my Earl indicator continues to be in place and the slower Earl2 continues to go down. The good news is that the overbought situation is being resolved by sideways price action so far, but that doesn’t guarantee it will stay that way. With all indicators pointing down such a sideways could end with a sudden pronounced downturn.
The LT wave for January points to price weakness after the 21st, so there is good reason to stay cautious here. This kind of sideways movement with low volatility tends to make some investors feel safe. But when a market moves like this there is actually a growing risk for a sudden sharp move once the market decides which way it wants to go next.
I expect this market indecision to be resolved sooner rather than later and currently the base scenario is for a move down to come first. In that case a retest of the 2180 area would become the initial target.
A burst out above the obvious overhead resistance levels near 2300 would tell us that this base scenario is wrong.