A major price cycle on the daily S&P 500 chart, which shows reliability in bottoming about every 15.5 months, is due for its next low on or about October 31. The cycle appears to have been influencing prices since the 2002-03 lows.

To any market historian, the suggestion that such a major cycle is due to bottom next in the second half of October sends shivers down the spine of the most ardent market optimist.

The cycle is now 84% complete, which means that it is very mature and is in its "down-hard" position entering into its final phase prior to bottoming. Notwithstanding the recent vertical recovery rally from 1101.54 to today's high at 1204.49, or +9.4% in just five sessions, the strength comes within the most negative portion of the overarching cycle, but is way too early to be considered a significant cycle low.

No, the much more likely scenario suggests that the Aug 9 low is the first of at least two, and perhaps several, declines to lower-lows into the anticipated October bottom.

Finally, let's notice that this impending cycle low has emerged from weakness off of an 8-9 month topping formation. The last time the 15.5 month cycle bottom occurred in the aftermath of a multi-month topping formation was the SPX breakdown in September 2008 off of a major distribution pattern that started in January 2008.

This year's cyclic pattern is very similar, although not quite as potentially negative.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

© 2002-2011 MPTrader.com, an AdviceTrade publication. All rights reserved. Any publication, distribution, retransmission or reproduction of information or data contained on this Web site without written consent from MPTrader is prohibited. See our disclaimer.

Mike Paulenoff Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.