S&P Stock Market Rally To Fail, Lower Lows Ahead

By: Jim_Curry

In a prior article (10/22/09), I discussed several key mid-term cycles that were turning down into the mid-November time period - which would ideally set the S&P 500 up for it's largest correction seen since coming off the March, 2009 bottom. Since that time, the SPX has seen a sharp decline from the 1101.36 swing high to the 1029.38 low, seen in Monday's trading session.

For the short-term, the probabilities did favor the current rally that we are seeing, with the smaller 20-day cycle in prime bottoming range at the recent swing low. Taking out the 1052.18 figure to the upside early in Tuesday's session favored the upward phase of this cycle to be back in force - which targeted some test of the 1069 figure, plus or minus a few points in either direction.

In terms of patterns, the decline into the 1029.38 low was a 5-wave affair - which is consistent with the downward phases of the larger 90 and 180-day cycles, which are due for a low around mid-to-late November. Thus far, the current rally off the same is taking the form of a 3-wave affair, shown below on a 60-minute chart of the SPX:

Moving forward, as we move into the month of November we have a monthly projected resistance high near the 1069 level, plus or minus, with higher resistance just overhead at the 61% retracement of the prior swing down, or approximately 1073 SPX CASH.

The chart below once again shows the approximate position of the 90 and 180-day cycles, which are looking for a combination low anywhere in the mid-to-late November timeframe:

The short-term forecast from the combination of the 10 and 20-day cycles is shown on the next chart, which is currently projecting the next minor cycle top around the November 6th period, plus or minus a day. A high anywhere in here would ideally give way to weakness into a November 11th low (plus or minus a day), then strength into around November 19th - also plus or minus a day. The position of the 10 and 20-day cycles are shown in the lower half of this same chart:

The bottom line with all of the above is that the current rally up is due to the 20-day cycle, and is favored to end up as a countertrend retracement - with resistance at or near the 1069-1073 level (plus or minus). If this assessment is correct, then new lows for the larger swing are favored into mid-to-late November, then to reassess the action at that time to discern whether a larger bottom with the 90 and 180-day cycles is being seen.

By Jim Curry
Market Turns Advisory
email: jcurry@cycle-wave.com
website: http://cyclewave.homestead.com

Jim Curry is the editor and publisher of Market Turns advisory, which specializes in using cyclical analysis to time the markets. To be added to our mailing list click HERE

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