SPI Primary (2010) and Secondary cycles (2011)As mentioned at the start of April, the market was either going to continue lower...
or
because the S&P 500 had remained above key support levels (Fake break), it was more likely going to continue to consolidate until the start of MAY, and then try and make another move towards new highs in the 2nd quarter (5093-5193)
As we can see in the above right chart, the market has moved down into this Week's lows, and next week’s lows now match the MAY 50% level. (Critical Support)
The current price action suggests that the Market may continue towards new highs in
the 2nd quarter @ 5093 to 5193, once Support has been validated ( doubleWeekly low pattern)
However, keep in mind we had the same pattern in 2010, when the market reversed down from the April highs, and by the 2nd day support levels failed in MAY (left Chart), on the back of weakness in the S&P 500.
What’s the difference this time?
The Primary cycles in the Aussie market are different, in 2010 we were below the 50% level, whereas in 2011 we are above, so there’s more reason for the trend to continue higher during the current Primary cycle.
The S&P is also above the Yearly highs (1301-1331), whereas in MAY 2010, the market opened below the Yearly highs and sold off on the first day of MAY (flash crash)
And currently, US markets continue with QE2 until the end June, which can help underpin
the current upward trend in US markets.
In conclusion:- be aware of any weakness below the MAY 50% level
