Stock Market Likely Forms Intermediate-term High

| September 29, 2020

The violent rebound off of the low in March has become extremely oversold, and it is likely that the reversal this week signals the formation of an intermediate-term high.

Intermediate-term direction remains in question following the crash in March, and it will be important to monitor market behavior closely during the formation of the forthcoming intermediate-term low for the next signal with regard to trend direction.

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 March. Technical indicators are moderately bullish overall, favoring a continuation of the advance.

Cycle Analysis

We are 24 weeks into the rally phase of the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending March 27. The intermediate-term cycle high (ITCH) is overdue and it could form at any time, if it has not already occurred this week. The magnitude of the last decline phase signals the likely transition to a bearish translation and favors additional weakness. The window during which the next ITCL is likely to occur is now through October 9, with our best estimate being in the September 11 to October 9 range.

  • Last ITCL: March 27, 2019
  • Cycle Duration: 24 weeks
  • Cycle Translation: Bearish
  • Next ITCL Window: Now through October 9; best estimate in the September 11 to October 9 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 recent long-term high at 3,510 would reconfirm the uptrend from March and forecast additional gains.
  • Bearish Scenario: A weekly close well below uptrend support near 3,490 would predict a return to the middle of the Bollinger bands at 3,144.

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

Category: Commentary, Market Update

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