Stock Market Cyclical Bull Faces Important Test
Erik McCurdy | Dec 30, 2012 12:32AM ET
The S&P 500 index closed sharply lower Friday, retreating further from previous long-term highs of the cyclical bull market from 2009 and returning to congestion support in the 1,400 area. Technical indicators on the daily chart continue to weaken and are now slightly bearish overall, tentatively favoring a continuation of the decline from last week.
Early last week, cycle analysis identified the potential formation of the latest beta high (BH). Since then, the beta phase decline has developed as expected and the current short-term cycle has reached a potentially important inflection point.
A quick rebound followed by an extended alpha phase rally of more than 10 sessions in duration that moves above the last beta high (BH) followed by a shallow alpha phase decline would reconfirm the current bullish translation and favor additional short-term strength.
Alternatively, an extended beta phase decline of more than 9 sessions in duration that moves well below the last beta low (BL) followed by a weak alpha phase rally would signal the likely transition to a bearish translation.
From an intermediate-term perspective, the rebound off of the last intermediate-term cycle low (ITCL) continues to track the overdue for termination , so we will continue to monitor the development of the latest annual cycle closely.
Charts do not always have an important story to tell, but it is important to listen to their message when they do. The stock market is on the verge, and is issuing meaningful signals across multiple time frames, so it will be important to monitor price behavior closely during the next several weeks.
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