Stock Market Retreats from Bull Market Highs

| April 29, 2016


Last week, our computer models predicted the likely formation of the alpha high (AH) of the current short-term cycle in the stock market. Since then, the S&P 500 index has moved lower, approaching the short-term cycle low (STCL) that formed in early April. The move down toward the previous STCL during the last 7 sessions suggests that cycle translation is in question and the character of the developing alpha phase decline will provide the next signal with respect to short-term direction.

From a big picture perspective, the stock market continues to form a massive distribution pattern and it remains likely that the cyclical bull market from 2009 is in the process of terminating.

As we often note, a long-term top is a process, not an event. The character of the current short-term cycle will provide the next assessment of stock market health, so it will be important to monitor market behavior closely during the next several weeks.


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Last week, our computer models predicted the likely formation of the alpha high (AH) of the current short-term cycle in the stock market. Since then, the S&P 500 index has moved lower, approaching the short-term cycle low (STCL) that formed in early April. The move down toward the previous STCL during the last 7 sessions suggests that cycle translation is in question and the character of the developing alpha phase decline will provide the next signal with respect to short-term direction.

An extended alpha phase decline that moves well below the last STCL would signal the likely transition to a bearish translation and forecast additional short-term weakness during the next two months.

Alternatively, a quick rebound followed by an extended beta phase rally that moves well above the last AH would reconfirm the current bullish translation and favor additional short-term strength.

From a big picture perspective, the stock market continues to form a massive distribution pattern and it remains likely that the cyclical bull market from 2009 is in the process of terminating.

As we often note, a long-term top is a process, not an event. The character of the current short-term cycle will provide the next assessment of stock market health, so it will be important to monitor market behavior closely during the next several weeks.

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Category: Commentary, Market Update


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