The Medium-Long Term Model states that this bull market has 1-2 years left. As a result, we are tryin to catch the bull market’s top as accurately as possible.

The January 2018 top did not have a weekly bearish divergence. Momentum (RSI 14) peaked at the same time as the S&P 500.

I frequently state that bull markets end AFTER momentum has weakened. This isn’t 100% true.

Bull markets cannot end when momentum is EXTREMELY strong as it was in January 2018. When momentum is extremely strong, there must be a bearish divergence before the bull market can end. (See study from January)
Bull markets don’t have to end with a bearish divergence (weekly bar chart). 3 historical bull market tops had bearish divergences. 1 bull market top did not have a bearish divergence.

Let’s look at the historical bull market tops in detail.

October 2007 bull market top

The S&P 500 made a bearish divergence (weekly bar chart, RSI 14) before topping in October 2007.

March 2000 top

The S&P 500 made a long and steady bearish divergence (weekly bar chart, RSI 14) before topping in March 2000.

January 1973

The S&P 500 made a bearish divergence (weekly bar chart, RSI 14) before topping in January 1973.

December 1968

The S&P 500 DID NOT makee a bearish divergence topping in December 1968.

Conclusion

I don’t expect the bull market’s top to be in. Most bull market tops end with a bearish divergence. We will probably see a bearish divergence when this bull market peaks because the S&P 500’s RSI was extremely high in 2018. The S&P 500 will go higher throughout 2018 in a choppy manner. A choppy uptrend = a not extremely high RSI, which means that there will be a bearish divergence.

By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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.