By Christopher Diodato – TradersBase.com
Feeling slightly irrational right now, let’s analyze the market using some of the most ambiguous, but still effective methods. It’s common knowledge now that I believe that the S & P will hit the 1566 level before reversing, but when? We can place a market top around October 22-26 using both Gann and Demark analysis. Unfortunately, we don’t know whether that will be the final top, or the second to final top (my current analysis says we get one more chance to buy the dip). It is all dependent on the speed of the next advance. The market will give us those answers as the date draws nearer.
Here’s the chart of the Demark Sequential, which is a completely objective alternative to Elliott Wave analysis. The logic is that after nine consecutive closes higher (with some qualifiers), the market will be vulnerable to an exhaustion sell-off. This method was exhaustively tested by Tom Demark and it works in all time frames. Here are the weekly and monthly charts of the Sequential on the S & P 500 ETF, SPY.
Both charts present an “if/then” scenario. The scenario that I see presents a possible market top in October, and specifically around October 22-26. All we need is a continued up trend, which after the Bernanke put was activated, seems imminent. Even a slowly uptrending market will give a complete setup.
So there is a look from the Demark point of view. Stay tuned for tomorrow’s post on the Gann analysis. It comes to a similar conclusion.