US Stocks Could be Blasting into a December 2021 Top

As the US stock market entered November 2021 it appeared due for a correction lasting  one to two weeks. What happen was a continuation of the manic rally that began  on 10/13/21.

The daily S&P 500 (SPX) chart courtesy of Trading View illustrates the recent action.

The best SPX – Elliott wave count since the lows of early October was that wave “B” up of a Running Horizontal Triangle was under construction.  This wave count is still valid but the proportion of the rally since 10/4/21 is now large relative to the prior decline, making the supposed Running Horizontal Triangle count a low probability.  

The action since the 10/13/21 looks like a classic third wave with exceedingly small and brief corrections.  What makes  determining the correct  Elliott wave count since 10/04/21 difficult are the two subsequent declines  after the primary bottom of 10/4/21.  The second decline that bottomed 10/13/21 is  larger in price and  time than the first decline that ended 10/06/21.  This  could be a bullish series of waves “one’s” and “two’s” – however the second wave “two” is usually  smaller in price and time.

It’s  possible the supposed Intermediate wave (4) ended on 10/06/21 and was truncated – it failed to go below the 10/04/21 bottom. 

The maximum daily RSI reading  for the entire bull move since March 2020 was 82% made on 09/02/20.  The daily RSI reading on 11/05/21 was 76%.  This  bearish divergence implies longer-term weakening of the bullish momentum.  However, note that near-term daily RSI on 11/05/21 was at  the highest reading since late September 2021.  In the next few weeks, its possible near-term daily bearish divergences could  develop.

The 60- minute SPX chart illustrates short-term momentum. 

During  persistent moves divergences can frequently be eliminated. On 11/04/21 the hourly RSI exceeded a bearish divergence made on 10/26/21. On 11/05/21 hourly RSI exceeded the 11/04/21 reading.  This  is  short-term bullish implying higher prices in the near future.

The daily NYSE new – 52-week highs ($NYHGH) chart courtesy of Stockcharts.com illustrates internal momentum.

On 11/05/21 $NYHGH exceeded the bearish divergence made in early September.  Near-term this is bullish implying  higher  prices  in the next few weeks.

On 11/03/21 traders were stopped out of a 50% short position initiated on the SPX open 11/01/21.  The two stop levels were at 4640.00 and 4660.00 the total loss was  0.43%.

The 10/24/21 blog “Possible US Stock Market Top – December 2021” discussed how the SPX could make a major peak in  December 2021.  If the SPX can make a new all-time high in December 2021 it could reach a major Fibonacci price zone in the 4800 area.  If this scenario plays out it could create a fascinating  Fibonacci price/time relationship.  Depending on market action this will be examined in more detail, late November or early December.   

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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