Stock Market Attempts to Form Important Intermediate-term Low

| April 14, 2018

A cycle low signal was nearly generated this week, indicating that the half cycle low (HCL) of the current intermediate-term cycle likely formed during the week ending March 23. We are 3 weeks into the second rally phase of the intermediate-term cycle from February. Following the violent breakdown in January, the stock market has attempted to form a meaningful bottom. A subsequent return to the January high would indicate that the long-term uptrend is preparing to resume.

The early formation of the last intermediate-term high below the previous high in January suggests that long-term direction is now in question. An extended rally phase that moves above the January high at 2,873 would reconfirm the long-term uptrend and forecast additional gains. However, a quick reversal followed by an extended decline phase that moves well below the last intermediate-term cycle low (ITCL) at 2,532 would signal the likely transition to a bearish intermediate-term translation and favor additional weakness heading into the next intermediate-term low in June.

S&P 500 Index Weekly Chart Analyses

The following technical and cycle analyses provide intermediate-term forecasts for the S&P 500 index. For short-term outlooks, see the latest short-term forecast.

Technical Analysis

The index closed moderately higher this week, reacting off of recent short-term lows below support at the lower boundary of the uptrend from 2016. Technical indicators are neutral to slightly bullish overall, suggesting that direction is in question with a slight upward bias.

Cycle Analysis

A cycle low signal was nearly generated this week, indicating that a half cycle low (HCL) likely formed during the week ending March 23. We are 3 weeks into the second rally phase of the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending February 9. The early formation of the latest half cycle high (HCH) suggests that cycle translation is in question. An extended rally phase that moves above the HCH in January at 2,873 would reconfirm the current bullish translation and favor additional intermediate-term strength. Alternatively, a quick reversal followed by an extended decline phase that moves well below the last ITCL at 2,532 would signal the likely transition to a bearish translation. The window during which the next ITCL is likely to occur is from June 1 to August 3, with our best estimate being in the June 1 to June 29 range.

  • Last ITCL: February 9, 2018
  • Cycle Duration: 9 weeks
  • Cycle Translation: Bullish
  • Next ITCL Window: June 1 to August 3; best estimate in the June 1 to June 29 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Intermediate-term Outlook

  • Bullish Scenario: A rebound and weekly close above the previous long-term high at 2,873 would reconfirm the cyclical uptrend and forecast additional gains.
  • Bearish Scenario: A weekly close well below the 50-week moving average at 2,571 would reconfirm the downtrend from January and predict a move down to congestion support in the 2,400 area.

The bearish scenario is slightly more likely (~60% probable).

Category: Commentary, Market Update


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