Stock Market Forms Key Intermediate-term High

| October 6, 2018

A cycle high signal was generated this week, indicating that the second half cycle high (HCH) of the intermediate-term cycle from March likely formed during the week ending September 21. We are 2 weeks into the second decline phase of the current intermediate-term cycle. The rally from March failed to move up to a meaningful new high, indicating that the long-term uptrend may be losing momentum.

Intermediate-term cycle direction remains in question. A quick rebound followed by an extended rally phase that moves well above the September high at 2,930 would reconfirm the current bullish trend and forecast additional gains. However, an extended decline phase that moves well below the last intermediate-term cycle low (ITCL) in March at 2,588 would signal the likely transition to a bearish trend and favor additional intermediate-term weakness heading into 2019.

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 lower this week, retreating from previous highs of the uptrend from 2016. Technical indicators are moderately bullish overall, favoring a continuation of the advance.

Cycle Analysis

A cycle high signal was generated this week, indicating that the second half cycle high (HCH) of the current intermediate-term cycle likely formed during the week ending September 21. We are 2 weeks into the second decline phase of the cycle following the ITCL that occurred during the week ending March 23. Cycle translation is in question. A quick rebound followed by an extended rally phase that moves well above the last half cycle high (HCH) at 2,930 would reconfirm the current bullish translation and favor additional intermediate-term strength. Alternatively, an extended decline phase that moves well below the last ITCL at 2,588 would signal the likely transition to a bearish translation. The window during which the next ITCL is likely to occur is now through November 2.

  • Last ITCL: March 23, 2018
  • Cycle Duration: 28 weeks
  • Cycle Translation: Bullish
  • Next ITCL Window: Now through November 2.
  • Setup Status: Cycle high setup occurred this week.
  • Trigger Status: Cycle high trigger occurred this week.
  • Signal Status: Cycle high signal was generated this week.
  • Stop Level: None active.

Intermediate-term Outlook

  • Bullish Scenario: A rebound and weekly close well above the recent long-term high at 2,930 would reconfirm the cyclical uptrend and forecast additional gains.
  • Bearish Scenario: A weekly close below the middle of the Bollinger bands at 2,824 would predict a return to the 50-week moving average at 2,739.

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

Category: Commentary, Market Update


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