The S&P 500 index closed moderately lower this week, retreating further from recent highs of the cyclical bull market from 2009 and breaking below support at the lower boundary of the rebound from 2011. In early October, we noted that the advance off of the low in 2011 had developed into a rising wedge, which is a bearish technical formation that is usually followed by a sharp decline that retraces most of the preceding gains. As expected, the decline from September quickly returned to rising wedge support during October and the close below the lower boundary of the formation this week is a bearish development that favors a return to cyclical bull market support currently near 1,239.
However, the outlook is complicated by intermediate-term cycle analysis, because the cycle from June continues to exhibit a bullish translation and the next intermediate-term cycle low (ITCL) will likely form relatively soon.
Technical analysis and cycle analysis complement it each other well because one technique focuses primarily on price and the other focuses on time. However, they are not always in agreement with regard to their outlooks. While the technical breakdown of the rising wedge formation this week is a bearish development, cycle translation remains bullish and the next intermediate-term low will form soon. As always, it is through the integration of their respective outlooks that we develop the most reliable forecasting models, which indicate that market behavior during the next several weeks will almost certainly provide a meaningful signal with regard to long-term direction.
We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.