At the beginning of last week, our cycle analysis suggested that the intermediate-term cycle low (ITCL) we had been expecting was in the process of forming. Although a confirmed cycle low signal was not generated, the strong weekly close on Friday indicated that the low is likely in place.
Although intermediate-term cycle translation is still assumed to be bullish, the recent breakdown of the rising wedge formation on the weekly chart is a bearish development that suggests the long-term uptrend is losing strength.
At a current duration of nearly 45 months, the cyclical bull market from 2009 is overdue for termination and the next long-term top could form at any time.
As we note often, the stock market gains of the past two years have been fueled primarily by government stimulus and, as such, they are not sustainable and they will likely be erased during the forthcoming cyclical bear market. Therefore, we remain fully defensive from an investment perspective. With respect to trading, price behavior will continue to be characterized by violent moves in both directions during the next several months, providing excellent swing trade opportunities. As always, all entry and exit points should be selected using optimal entry points as identified by judiciously applied cycle analysis.
The character of the rebound off of the latest ITCL will provide the next signal with respect to long-term direction, so it will be important to monitor market behavior closely during the next several weeks. 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.