The S&P 500 Continues to Rapidly Build Its “Domed House” As Projected

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The broad stock market is on its way to building a “Domed House” and to challenge multi-year highs, or even all-time highs, in the process. Based on the forecast of my proprietary Long Wave Index, the broad market should be in a short-term bullish time-window until 1/17/2013. Words: 634; Charts: 2

So writes Dr. Nu Yu (http://marketweeklyupdate.com) in edited excerpts of a portion of his most recent Market Weekly Update* entitled The Broad Stock Market Challenges Multi-Year Highs as 2013 Starts.

This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. 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:

We have been tracking the current speculated “Three Peaks and a Domed House” pattern of the S&P 500 index for almost two months [see links to earlier articles below].  The “Three Peaks and a Domed House” pattern is one of complex chart patterns, and it presents higher difficulties or challenges for a single technical indicator or system to handle the market throughout the entire pattern.  It enhances risks also opportunities for both the bulls and bears.

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.

The progressional development of the current speculated “Three Peaks and a Domed House” pattern is as follows:

a) The “Three Peak” Pattern

From mid-September to mid-October, the SPX formed three peaks in a trading range between 1430 and 1460 while the broad market was in the distribution stage of the market cycle. That was the earliest warning sign for a beginning of “Three Peaks and a Domed House” formation.

b) The “Seperating Decline” Transition

From late October to mid-November, the SPX declined about 110 points from 1460 to 1350.  Typically, this decline is a phase transition from the “Three Peaks” phase to the “Basement” phase, and corresponds to the mark-down stage of the market cycle.  It usually moves much faster than general technical indicators can respond.

c) The “Basement” Phase

Around mid-November the SPX was in the “Basement” phase that is typically a “bear trap” with a bearish market sentiment combining all bearish views from both headline news and majority of popular technical indicators.  The accumulation stage of the market cycle usually starts from here and it progresses stealthily.

d) The “Swift Advance” Phase to the “First Floor”

From mid-November to early January, the SPX sharply advanced about 110 points from 1350 to 1460. Such a swift advance is the beginning of the front wall of the Domed House in its transition from the “Basement” phase to the “First Floor” phase while the broad market was still in the accumulation stage of the market cycle with a bearish market sentiment.

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

The target price range for this phase had been projected between 1400 and 1460 and it was finally reached during the powerful advance last week to the tageted “First Floor” phase.

f) The “Roof” Phase

As the “First Floor” phase matures, the accumulation stage of the market cycle should gradually come to an end, and the mark-up stage could start immediately with another advance towards the “Roof” phase of the Domed House.

The current speculated “Three Peaks and a Domed House” pattern is also supported by the typical weekly MACD Histogram indicator mathematically mapped on the SPX daily chart above, marked with each stage of the market cycle.  [For those interested,]there is a good article titled “Market Cycles: The Key To Maximum Returns” on Investopedia.com which talks about the market behaviors at different stages of the market cycle.

Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://marketweeklyupdate.com/2013/01/06/01062013-market-update/

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Related Articles:

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

[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

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