Stock Market Experiences Key Reversal

| August 3, 2019

A cycle high signal was generated this week, indicating that the intermediate-term cycle high (ITCH) of the intermediate-term cycle that began in June likely formed during the week ending July 26. This is a potentially key reversal that could lead to a return to the low in May.

A quick rebound followed by a move up to new highs would reconfirm the current bullish trend and favor additional intermediate-term strength. Alternatively, an extended decline phase that returns to the last intermediate-term cycle low (ITCL) at 2,729 on the S&P 500 index would suggest that intermediate-term direction is in question.

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 sharply 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 July 26. We are 1 week into the decline phase of the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending May 31. A quick rebound followed by a move up to new highs would reconfirm the current bullish translation and favor additional intermediate-term strength. Alternatively, an extended decline phase that returns to the last ITCL at 2,729 would suggest that cycle translation is in question. The window during which the next ITCL is likely to occur is from September 27 to November 29, with our best estimate being in the October 25 to November 22 range.

  • Last ITCL: May 31, 2019
  • Cycle Duration: 9 weeks
  • Cycle Translation: Bullish
  • Next ITCL Window: September 27 to November 29; best estimate in the October 25 to November 22 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 high at 3,026 would reconfirm the uptrend from December and forecast additional gains.
  • Bearish Scenario: A weekly close well below the middle of the Bollinger bands at 2,907 would predict a move down toward the bottom of the Bollinger bands at 2,769.

Both scenarios are equally likely.

Category: Commentary, Market Update


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