Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Potential Cyclical Top Continues to Develop as Anticipated

|Includes: DIA, QQQ, SPDR S&P 500 Trust ETF (SPY)

The S&P 500 index closed slightly higher this week, continuing a test of congestion resistance in the 1,270 area. As expected, stocks have struggled to break above the congestion zone that served as strong support for the distribution pattern during the first half of the year following the rebound off of cyclical bull market support in early October.

The stock market continues to behave as expected following the breakdown on the monthly chart in August and it remains highly likely that the April high was a cyclical trend inflection point given the secular bear market environment.

The latest Annual Cycle Low (NYSE:ACL) occurred in October and the rally phase of the new annual cycle has struggled in November following the sharp oversold reaction last month.

Elevated short-term volatility continues to drive extreme sentiment swings as most market participants remain focused on the daily news flow related to the unfolding sovereign debt crisis in Europe. However, the big picture continues to develop as expected and it will be important to monitor price behavior closely during the next several weeks for the final confirmation that a new cyclical downtrend is underway. We will identify the key developments as they occur in our market forecasts and signal notifications available to subscribers.

Subscribe to our RSS feed to receive our free daily market update.