Stock Market Nearing Critical ‘Time and Price’ Juncture

Radar ScreenMany investors were caught by surprise when the stock market reversed higher and continued the six month long uptrend. As the markets turned higher, many groups began secondary breakouts from long-term bases. And more recently, we’ve seen some incredible moves from the likes of Green Mountain Coffee Roasters (GMCR) and Tesla Motors Inc. (TSLA). Although (I might add) the charts of GMCR and TSLA are flashing warning signs at this point in their trends, others seem to be getting started. So when will this leg higher find resistance? And where/how will this resistance show up? Let’s turn to some time and price technical analysis to get a better handle on what’s in store.

Using financial astrology from a time and price perspective, the next date to watch for continuation or change is the days on or following the long awaited third Pluto-Uranus square May 20-21. For more color on planetary stations, read this piece that I penned in March. Another method, which appears to confirm this timing, is to identify the next levels of major support or resistance for “trending” vehicles (i.e. stocks and indices). The market tends to move in synchronicity, and as one vehicle finds resistance, another finds support. Let’s take a look at NASDAQ big leaguer Google Inc. (GOOG), the S&P 500 (SPX), and the accepted risk-free trade, 20+ year Treasury (TLT), to gauge where their respective trends may begin to stall. At these levels, we can observe the market closely for clues of a continuation or stalling to this new leg.

All eyes on GOOG.  The internet giant broke above all-time highs in late January, just as the “wall of worry” began trending in social media. The trend stalled in early March, and GOOG consolidated over the following weeks until regaining momentum earlier this month. Along with GOOG, we saw signs of a renewed bull market with fresh breakouts from long term bases across sectors. GOOG at an all-time high will not have to contend with overhead supply; however, there are other points of resistance that traders will be looking for. A lesson in Technical Analysis:  trend lines are relevant across time, and we will often see what once served as support now serve as the next potential resistance. The channel that GOOG traded in from November until the trend stalled in March will likely be the next point of resistance. An example of time and price technical analysis. Click to enlarge images.

Google Stock Chart – Time and Price analysis

GOOG stock chart_May 2013

The SPX, like GOOG above, has been trending neatly in its channel since the U.S. markets found a bottom in mid-November.  The next potential resistance is the top of this channel or, as the market is now at all-time highs, the 261.8% Fib extension from the fall 2012 correction. Note the time target “O” in the third week of May.

S&P 500 Chart – Time and Price analysis

SPX stock market chart_May 2013

Finally, we move on to the 20+year Treasury (TLT).  The six-month long uptrend in equities hit the next gear when the TLT fell below its 10/50 week moving average represented by the brown line.  Note, in red “do or die.” The latter was the sentiment in late April when the market resisted the long anticipated pull-back.  It is this chart of the risk on/off trade that best portrays the market’s emotions at this time. After a brief false move above $124 resistance in May, the TLT fell back below resistance. And as you can see by the gap on May 3, a decision was made. This lead to multiple breakouts across sectors and the equities market was headed up again. Provided the TLT stays below the resistance in red at around 117.75, the next support is in green drawn by taking the low of the base in January.

TLT chart – Time and Price analysis

TLT chart_May 2013

The market is behaving as if it is in a race to get to wherever it is attempting to go. But, let’s see how it behaves as it reaches its projected targets in time and price.

Charts from FreeStockCharts.com

No position in any of the mentioned securities at the time of publication.

Twitter:  @RinehartMaria and @seeitmarket

Sign up for our FREE newsletter
and receive our best trading ideas and research