Stock Market Rally Faces Important Short-term Test

| April 13, 2017

In early March, our computer models predicted the early formation of the first high of the current short-term cycle. Since then, The S&P 500 index has trended lower, indicating that short-term direction is in question. As shown on the following daily chart, our cycle analysis computer models indicate that the latest short-term low will likely form sometime during the next week.

The character of the upcoming short-term cycle will indicate if the long-term uptrend is on the verge of resuming or a meaningful direction change is in progress. A strong rebound off of the forthcoming short-term cycle low (STCL) followed by a move up to new highs would reconfirm the uptrend and forecast additional gains. Alternatively, a weak rebound off of the next STCL followed by a sharp decline would confirm the start of a new downtrend. From a big picture perspective, the intermediate-term trend is strongly bullish at the moment and our computer models indicate that the latest intermediate-term low is imminent.

It is possible that the formation of the latest STCL will be accompanied by the generation of an intermediate-term cycle low signal. Should the STCL and the latest intermediate-term cycle low (ITCL) form simultaneously, a subsequent move up to new long-term highs would reconfirm the bull market and predict additional gains for the next 2 to 3 months. Therefore, it will be important to monitor market behavior closely during the next week.

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Category: Commentary, Market Update


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