Violent Stock Market Rally Finally Ends

| May 11, 2019

A cycle high signal was generated this week, indicating that the intermediate-term cycle high (ITCH) of the intermediate-term cycle from December likely formed during the week ending May 3. The extreme nature of the preceding advance suggests that additional violent moves will likely develop during the next several months.

Intermediate-term cycle direction is in question. An extended decline phase that moves below the last intermediate-term cycle low (ITCL) at 2,347 would reconfirm the current bearish trend and forecast additional losses. Alternatively, a quick rebound followed by a move well above the intermediate-term half cycle high (HCH) in September at 2,941 would reconfirm the long-term uptrend and predict additional gains.

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 recent highs of the uptrend from December. 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 intermediate-term cycle high (ITCH) of the current cycle likely formed during the week ending May 3. We are 1 week into the decline phase of the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending December 21. Cycle translation is in question. An extended decline phase that moves below the last ITCL at 2,347 would reconfirm the current bearish translation and favor additional intermediate-term weakness. Alternatively, a quick rebound followed by an extended rally phase that moves well above the half cycle high (HCH) in September at 2,941 would signal the likely transition back to a bullish translation. The window during which the next ITCL is likely to occur is now through June 21, with our best estimate being in the May 17 to June 14 range.

  • Last ITCL: December 21, 2018
  • Cycle Duration: 20 weeks
  • Cycle Translation: Bearish
  • Next ITCL Window: Now through June 21; best estimate in the May 17 to June 14 range.
  • 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 above the recent intermediate-term high at 2,946 would reconfirm the uptrend from December and forecast a move up to the top of the Bollinger bands at 3,028.
  • Bearish Scenario: A weekly close well below the middle of the Bollinger bands at 2,770 would predict a move down toward congestion support at the 2,600 level.

The bullish scenario is more likely (~70% probable).

Category: Commentary, Market Update


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