Dr. Nu Yu’s Update on the S&P 500′s Developing “Three Peaks and a Domed House” Pattern

“Follow the munKNEE” via twitter & Facebook

[In spite of the fact that my proprietary] Leading-Wave Index does not support the current general bearish market sentiment the broad market is testing whether it has reached the “First Floor” phase of the speculated “Three Peaks and a Domed House” pattern.  A consolidation is expected in the “First Floor” phase. Any significant directional movement could be washed out this week by the expectations of both the “Santa Claus Rally” and the “Fiscal Cliff”. [Below are charts to illustrate exactly where the S&P 500 is in this "Three Peaks and a Domed House" pattern. Most interesting!] Words: 463; Charts: 2

So writes Dr. Nu Yu (http://marketweeklyupdate.com) in edited excerpts of a portion of his most recent Market Weekly Update* entitled No Support for Bearish Sentiment from the Leading-Wave Index.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!), may have further edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Dr. Yu goes on to say, in part:

The “Three Peaks and a Domed House” Pattern

George Lindsay’s basic model of “the Three Peaks and a Domed House” pattern (see below uses “wave-counting” from 1 to 28 dividing the “Three Peaks and the Domed House” pattern into five major phases as follows: 1) Three Peaks, 2) Basement, 3) First Floor, 4) Roof, and 5) Plunge. My version differs from Lindsay’s original micro approach in that it uses a macro or “phase-counting” approach.

a) The “Three Peak” Pattern

As can be seen in the chart below, the S&P 500 formed a “Three Peak” pattern inside its trading range from September to October and could now be the beginning of a “Three Peaks and a Domed House” formation.

b) The “Seperating Decline” Transition

The downwave of the S&P 500 index between 10/18/2012 and 11/15/2012 was a “Separating Decline” for a transition from the “Three Peaks” phase to the “Basement” phase.

c) The “Basement” Phase

Typically the Basement phase is known as “the bear trap” with an integration of all bearish views including both headline news and the majority of popular technical indicators.

d) The “Front Wall” of the “First Floor” 

After the “Basement” phase gets well established, it starts to build up a “Domed House”.  A swift advance should be seen as a front wall of the “First Floor” phase.

e) The “First Floor” of the “Domed House”

The swift advance on the SPX launched in mid-November is projected to reach the level of 1460 to re-test the previous high.  In general, both the “Basement” phase and the “First Floor” phase are in an accumulation process of the market cycle when general market sentiment is still bearish.

The “First Floor” phase is typically a consolidation period and any significant directional movement could be washed out this week by the expectations of both the “Santa Claus Rally” and the “Fiscal Cliff”.

Summary

Last week the SPX briefly entered the territory of the projected “First Floor” phase above 1440, and retreated thereafter.  Now the question is whether it is defining the “First Floor” phase with a lower price level below the projected level of 1460.

We will see how the market develops this week but it looks like the fight between bulls and bears could be heavy around the key level of 1430.

Sign up HERE to receive munKNEE.com’s unique newsletter, Your Daily Intelligence Report

1. FREE
2. The “best of the best” financial, economic and investment articles to be found on the internet
3. An “edited excerpts” format to provide brevity & clarity to ensure a fast & easy read
4. Don’t waste time searching for articles worth reading. We do it for you!
5. Sign up HERE and begin receiving your newsletter starting tomorrow
6. You can also “follow the munKNEE” via twitter & Facebook

*http://marketweeklyupdate.com/2012/12/24/12242012-market-update/

Related Articles:

1. Investors, Get Fully Invested! S&P 500 On Verge of Entering Euphoria Stage of Cyclical Bull Market

[In spite of all that is seemingly wrong with the U.S. economy] I think we are on the verge of entering the euphoria stage of this cyclical bull market where traders become convinced that QE3 is a magic elexir with no unintended consequesnces. [As such,] I see a strong acceleration and a significant and sustained breakout above the S&P 500 September high of 1475. (Words: 264 + 3 charts)

2. Here’s Another Clue to Future Direction of S&P 500

Heard about the “Fiscal Cliff” lately?  How many times have you heard it mentioned in the last few hours? Is the media coverage about the “Fiscal Cliff” causing investors to look or focus in the wrong direction for clues to the market’s next significiant move?

3.  Dr. Nu Yu: S&P 500 Charts Showing “3 Peaks & a Domed House” Formation Suggest a Swift Advance to the “First Floor” Phase at…

The S&P 500 formed a three-peak pattern inside the trading range from September to October and is now at the beginning of a “Three Peaks and a Domed House” formation. The current swift advance of the SPX could reach the level of 1460 to re-test the previous high. Let’s take a look at some charts. Words: 255