6 Week Cycle Bottoming Early Next Week

Current Position of the Market

SPX Long-term trend: The uptrend should continue after pausing for a correction.

SPX Intermediate trend: SPX could make a new high before continuing its correcting into October/November.

Analysis of the short-term trend is done on a daily-basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discuss longer market trends.

Market Overview:

Until last week, analysis was relatively simple: SPX had made a top at 2491 which represented an intermediate peak. Since we are now in the decennial pattern ending in 7, and approaching October, the most bearish possible historical period for the stock market, it is easy to assume that an intermediate correction is taking place with the next low in October/November. The favored pattern for a correction is A-B-C, and we could count wave A as bottoming at 2427, with wave B now in progress headed for? A likely possibility, based on the primary congestion pattern created between 2440-45, is 2480/85. But if the count is taken across the entire pattern, it takes us up to 2505! There is also another way to count the base which yields 2507. So, with last week’s strength, the index has created enough uncertainty that we will have to let it tell us which of the two counts it wants to choose. Whatever the result, continuing to correct into October/November is more than probable. It’s only a question of whether the index will make a new high, first.

As mentioned to subscribers, there is a 6-wk cycle bottoming early next week which should give us a minor correction. The closing action on Friday suggested that the bottoming action had already started, and since the index waited until it printed 2480 to start correcting, it is going to make our analysis less complicated. If, after this minor correction, we go to 2485 and turn down sharply, we can be fairly certain that the B-wave has ended. However, if we keep going, then we will need to hold off and see if the second option is in play. More than often, Fibonacci counts and P&F counts are nearly identical. Since 2488 is the most “logical” extreme that can be attributed to the B-wave, that should be the red line in the sand (to use a cliché) for the B-wave.