Seeking Alpha

Erik McCurdy's  Instablog

Erik McCurdy
Send Message
Erik is the senior market technician for Prometheus Market Insight and has been performing chart analysis since 1995. The software program that he developed to monitor long-term stock market trends has correctly identified 92% of the cyclical turning points in the S&P 500 index since 1940.... More
My company:
Prometheus Market Insight
My blog:
Prometheus Market Insight
View Erik McCurdy's Instablogs on:
  • Stock Market Cyclical Bull Begins Important Test

    In early June, we noted that the historic stock market bubble had begun to exhibit early signs of weakness. At the time, our computer model predicted the imminent formation of the latest short-term cycle low (STCL) and intermediate-term cycle low (ITCL). As expected, the STCL formed on June 9 and the ITCL formed during the week ending June 12.

    (click to enlarge)

    (click to enlarge)

    Market internals such as breadth and volume continue to negatively diverging from price behavior, indicating that the bull market is losing upward momentum.

    (click to enlarge)

    (click to enlarge)

    These breakdowns in market internals tell us that distribution is taking place and that market participants are becoming more risk averse, suggesting that the uptrend has become vulnerable to a breakdown. As always, it is important to remember that a long-term top is a process, not an event. Now that the latest ITCL is in place, the character of the advance during the next several weeks will provide an important assessment of bull market health.

    We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers. Try our service for free.

    Jun 21 12:41 PM | Link | Comment!
  • Stock Market Experiences Meaningful Short-Term Breakdown

    The S&P 500 index closed moderately lower today, moving further below support at the lower boundary of the uptrend from 2014. Additionally, a bearish rising wedge formation had been developing since late 2014 and the close well below formation support is a meaningful technical breakdown from a short-term perspective.

    (click to enlarge)

    With respect to cycle analysis, our computer model correctly identified the formation of the last short-term high at the beta high (NYSE:BH) in May and the beta phase decline has accelerated during the last 3 sessions. However, our current computer model indicates that the latest short-term cycle low (STCL) is imminent, so a reaction could begin at any time during the next few sessions.

    (click to enlarge)

    Additionally, our intermediate-term computer model indicates that the latest intermediate-term cycle low (ITCL) is imminent and it will likely form sometime during the next three weeks.

    (click to enlarge)

    It is possible that the latest STCL and ITCL will form at the same time, so we may be on the verge of a meaningful rebound. However, as we discussed this past weekend, the cyclical uptrend from 2009 is exhibiting early signs of weakness. A brief rebound that fails to move up to significant new long-term highs would be the next sign that a cyclical top is in the process of forming. Therefore, it will be important to monitor closely the character of the advance off of the forthcoming ITCL.

    We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers. Try our service for free.

    Jun 08 7:22 PM | Link | Comment!
  • Stock Market Cyclical Bull Faces Important Test

    Click the image below the play this video.

    Fueled by a historic amount of stimulus from the Federal Reserve, the cyclical bull market in stocks that began in 2009 has accelerated into an unsustainable advance, causing investment risk to increase to one of the three highest readings during the past 85 years.

    (click to enlarge)

    Following the low in 2010, the stock market rally has exhibited the characteristics of a classic bubble as defined by a log periodic advance. The violent decline in January was a meaningful breakdown, signaling that the bubble may have begun the topping process. Since then, short-term market moves have become increasingly violent. When it occurs during the final phase of a highly irrational advance, this type of behavior is usually indicative of speculative exhaustion.

    (click to enlarge)

    From a short-term perspective, the decline last week favors the development of another violent downtrend heading into the next meaningful short-term low. On April 4, our cycle analysis identified the formation of the latest alpha high (NYSE:AH). Additionally, we noted that a quick move below the short-term cycle low (STCL) in late March would signal the likely transition to a bearish translation. Since the formation of the AH, stocks have moved well below the last STCL, confirming the transition to a bearish short-term translation and favoring additional weakness heading into the next STCL in late May.

    (click to enlarge)

    Looking ahead, if an extended alpha phase decline is followed by a weak beta phase rally and an extended beta phase decline, the new bearish translation would be reconfirmed and additional short-term weakness would be forecast in June and July.

    (click to enlarge)

    Alternatively, an extended beta phase rally that returns to recent long-term highs followed by a beta phase decline that holds well above the forthcoming beta low (BL) would suggest that cycle translation is in question.

    (click to enlarge)

    As always, these scenarios are approximations that represent the most likely possibilities identified by our computer models and actual price behavior will likely deviate from both. However, note that both scenarios suggest the current environment of extreme volatility is likely to continue for at least the next several weeks. From an intermediate-term perspective, the decline last week moved the S&P 500 index well below support at the lower boundary of the uptrend from 2011. Additional weakness next week would confirm this breakdown on the weekly chart and strongly favor the bearish short-term scenario that was outlined above.

    (click to enlarge)

    As we often note, a cyclical top is a process, not an event. A confirmed breakdown on the weekly chart would be a significant technical signal, and market behavior during the next several weeks will determine if the next cyclical bear market is likely commencing.

    We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers. Try our service for free.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 13 6:44 PM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.