Stock Market Tests Long-term High

| June 6, 2016


On May 24, our computer models predicted the formation of the latest short-term cycle low (STCL). Since then, the S&P 500 index has moved higher, approaching previous long-term highs of the cyclical bull market from 2009. The stock market has been moving sideways since the previous cycle began in early April, suggesting that short-term direction is in question. At a current duration of 11 sessions, the alpha phase rally from May 20 could terminate at any time during the next several sessions, and the character of the forthcoming 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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On May 24, our computer models predicted the formation of the latest short-term cycle low (STCL). Since then, the S&P 500 index has moved higher, approaching previous long-term highs of the cyclical bull market from 2009. The stock market has been moving sideways since the previous cycle began in early April, suggesting that short-term direction is in question. At a current duration of 11 sessions, the alpha phase rally from May 20 could terminate at any time during the next several sessions, and the character of the forthcoming 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 forthcoming 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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