JTH

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The Four Horseman's SPX/W4500/TRAN/NDX are working through "Range Expansion." This is a term used when we have a series of higher highs and lower lows, rendering the markets essentially trendless These measurements are interpreted by using a .25% box size with Point & Figure charts. This enables us to level the playing field between the indexes, thus allowing us to compare charts side-by-side more objectively.

As an example:

• SPX has 1 higher high and 2 lower lows "Range Expansion"
• W4500 has 1 higher high and 2 lower lows "Range Expansion"
  
• TRAN has 2 higher highs and 1 lower low "Range Expansion"
  
• AGG has 1 higher high and 2 lower lows "Range Expansion"

There are times when the markets are trendless and stuck within a set trading range, such as last March, May & September, we can call that "Range Contraction" or a trading range.

The S&P 500 & the Wilshire 4500 both have similar setups, have pierced their December highs and for the most part are trading in unison. Meanwhile, within the same area of time, both the Transports & NASDAQ 100 have faltered and failed to breach the same highs as the S&P 500 & Wilshire 4500. Because I believe The Transports & NASDAQ 100 are critical leaders for all the markets, when they fail to perform up to expectations, I take notice.

Case in point, below we have a chart of the S&P 500 on a .25% box Point & Figure chart.

• With 1 higher X and 2 Lower Os, we can clearly see the range expansion taking place and that we are working through a new column of Os, where the O stops is very important in understanding what the markets might do.
• For SPX, If the recent column of Os tags 1968.2 this will trigger a Double Bottom Breakdown, giving us a bearish price objective

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For EMW, If the recent column of Os tags 1000.45 this will trigger a Double Bottom Breakdown, giving us a bearish price objective



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When compared with SPX/EMW, the Transports show additional weakness (they were the 1st to trigger a sell on 2 January)



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NASDAQ 100 put in a double bottom today, if the downslide in the markets continue, then it should be the next index to trigger a sell



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Meanwhile AGG has been on a tear, rocketing, breaking through, creating new 52-week highs



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Now for some stats, from 1995-2014 (240 months)

• Day 1, 84 closed down
• Day 1,2, 43 closed down
  
• Day 1,2,3, 23 closed down
  
• For day 4, when days 1,2,3 close down, there is a 61% winning ratio

January's Trading day 4 has a 50% winning ratio with strong negative average gains

Of the last 11 Wednesdays, 4 closed up

Trade hard…Jason