The S&P 500 index closed sharply higher today, moving up toward recent highs of the cyclical bull market from 2009. The uptrend from November has moved higher at an unsustainable rate and the confirmed break below uptrend support last week signals the likely development of a potentially violent overbought correction. However, the final phase of speculative advances are usually characterized by extreme price moves in both directions, so the violent market behavior of the last two weeks will likely continue.
With respect to cycle analysis, a cycle low signal was generated today, indicating that a short-term low likely formed on April 18. Only a quick move below the stop level at 1,541 would invalidate the signal and suggest that the alpha phase decline from mid-April is still in progress. Given the current assumption that the latest short-term cycle low (STCL) formed in early April, the formation of another short-term low on April 18 would result in the development of an extremely brief alpha phase of only 9 sessions in duration, which would be highly unusual. Therefore, the confirmed formation of a short-term low on April 18 would likely cause a change to our preferred scenario and shift the last few inflection points to new locations.
Regardless of which short-term scenario unfolds during the next several sessions, the development of a violent correction sometime during the next several weeks remains highly likely. The cyclical bull market from 2009 continues to exhibit behavior consistent with the terminal phase of a speculative advance as modeled by a log periodic bubble.
As always, it is nearly impossible to predict the timing of a bubble reversal with any useful degree of statistical confidence. However, recent market behavior suggests that the turn could occur at any time, so it will be important to monitor the development of each short-term cycle closely until a confirmed long-term top is in place.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.