A correction from the low-1100's on the SPX down to the 950-960 area (plus or minus) would be in the range of 12% or better off the top - which is, statistically, in line with a normal percentage correction heading into a combined low with the 90 and 180-day cycles (i.e. 10% or greater off the top). Should this play itself out in the days/weeks ahead, then I would be looking for technical indications of a turning point bottom - as the probabilities will favor a continuance of the larger bullish trend into the Spring of 2010 or later, potentially for a move up into the 1260 area for the SPX. More on that in a future article. Jim Curry http://cyclewave.homestead.com/ Bio: Jim Curry is editor of Market Turns daily and weekly outlooks, which combined cycle analysis - along with various technical measures - to pinpoint turning point highs and lows in the stock indexes. He can be reached via email at jcurry@cycle-wave.com |
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: |
Of note is the inverted 'head & shoulder' pattern, which was confirmed in late-July with the push above neckline resistance at the 960 level - of which the same is now strong support for this index going forward (but with a good plus or minus variance). The SPX looks like it wants to make some test of this neckline in the next 2-6 weeks - again with the 90-day cycle very extended and due for a sharp correction. In terms of price then, the decline into the next 90-day low in November should ideally be in the range of 10%-or-greater off the top. From my market observations in regards to cycles, I have found a definite tendency of a cycle to revert back to a moving average of the same length, with the 90-day moving average currently at the 997 level (and rising). However, the upcoming low is not only going to be a bottom for the 90-day component - but also a low for a larger 180-day (40-week) cycle. With that, a correction could be seen that takes the SPX to as low as the 180-day moving average before it bottoms. Take a look at the next chart: |
The chart above shows the 180-day component - which is next due to bottom out in the November or December period of 2009. Note that the 180-day moving average is well under current price levels, right now around the 919 figure and rising on the SPX. The next chart is a close-up view of this 180-day cycle component. However, here I have extrapolated this same 180-day moving average to the mid-November time period, which is projected to come in at or around the 950-960 area at that time (numbers are approximate): |
A correction from the low-1100's on the SPX down to the 950-960 area (plus or minus) would be in the range of 12% or better off the top - which is, statistically, in line with a normal percentage correction heading into a combined low with the 90 and 180-day cycles (i.e. 10% or greater off the top). Should this play itself out in the days/weeks ahead, then I would be looking for technical indications of a turning point bottom - as the probabilities will favor a continuance of the larger bullish trend into the Spring of 2010 or later, potentially for a move up into the 1260 area for the SPX. More on that in a future article. Jim Curry http://cyclewave.homestead.com/ Bio: Jim Curry is editor of Market Turns daily and weekly outlooks, which combined cycle analysis - along with various technical measures - to pinpoint turning point highs and lows in the stock indexes. He can be reached via email at jcurry@cycle-wave.com |
