STOCK CYCLES HEADING SOUTH
By Jim Curry - Market Turns Advisory
So far, in 2009, the stock indexes have seen two firm corrections. The first was a 29% drop (basis SPX CASH) from the 01/06/09 high to the 03/06/09 bottom - with the second being the 9% decline from the 6/11/09 high to the 07/08/09 low.
Are you ready for number three?
The SPX has approached a key resistance level in the low-1100's, which encompasses various figures, up to and including our weekly and monthly projected resistance zone (1106-1113), as well as the critical 1121 figure - which is the 50% retracement of the move down from the October, 2007 peak to the March, 2009 bottom.
With the rally seen off the March lows, the SPX is also now well-extended from it's 200-day moving average - with several key cycles having recently moved into topping range.
Back in July, the decline into the 07/08/09 bottom came as the result of a combination low with the 45-day and 90-day cycles. The fact that the prior rally phase of the same was bullishly right-translated favored that higher highs would in fact materialize on the following swing up with these cycles.
In terms of time, the rally off the 45 and 90-day lows was not favored to peak prior to late-September or early-October. In terms of price, some test of the low-1100 area on the SPX was favored - which again is a major resistance level for this index.
The chart below shows the SPX, along with the approximate position of the 90-day cycle - which is next due to bottom out in the mid-to-late November timeframe: