Stock Market Annual Cycle Undergoes Important Test

| December 2, 2012

In late 1999, our Secular Trend Score (STS), which analyzes a large basket of fundamental, internal, technical and sentiment data, issued a secular trend sell signal for the stock market. At the time, our computer models predicted that stocks would enter a secular bear market that would last from 10 to 20 years. Following the topping process in 2000, a prototypical secular bear market began and it continues today.

The latest cyclical bull market from early 2009 has a current duration of 45 months. When they occur during secular bear markets, cyclical uptrends have an average duration of 33 months, so the formation of the latest long-term cycle high (LTCH) is overdue and it could occur at any time.

Long-term tops nearly always form in conjunction with an annual cycle translation change, so it will be important to monitor the development of each annual cycle closely until the overdue LTCH is in place.

We are six months into the annual cycle from June and a meaningful signal could occur as soon as December. Therefore, it will be important to monitor market behavior closely during the next two months for this potentially significant development with respect to long-term direction.

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Category: Commentary, Market Update

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