Saturday, September 6, 2008

SPX Cycles

The chart below is a SPX weekly plot with a 65 week cycle starting from the October 19, 1987 crash low. I've shifted it 1 bar to the right which realigns it to the 2007 high and adjusts for the 911 truncated trading week. The span of 65 weeks is 5x13 weeks, where 13 weeks is 1/4 of a year. The subdivisions of the 65 week span (lighter color) are the common fibonacci divisions of 65 weeks (0.09, 0.146, 0.236, 0.382, 0.500, 0.618 etc)

The October 2002 low was 780 weeks from the Oct-87 low (65*12 repetitions) and the following October 2007 high occurred at the 65*16 repetition bar (1040 weeks) The next 65 week count is 17 (1105 weeks) and occurs the first week of January in 2009. Ideally this would be a low and preferably a secondary low after the low I expect the first week of November.

I seriously doubt that any rallies which occur prior to the election will have significant force to do much more than work off oversold conditions. There is a considerable amount of fear in the markets and we are entering the tax loss selling period which should put additional pressure on just about all the issues trading on the major exchanges. In case you haven't noticed, hardly any stocks are in uptrends.

Caution is warranted.

S&P 500 Weekly

S&P 500 Daily

1 comment:

George said...

Some additional observations:

The short term divergence (July/Aug/Sept) also shows up in the MCO and the 10% component. The divergence is sufficient to signal a turn over the short term and clearly Mondays price action will be to the upside.

However, I doubt it is sufficient to provide the successful test to the July low in the 10% index (approx. -700) This suggests another test of the recent price low between now and year end.

A positive divergence of the current low COULD be validated IF the 10% index goes above +500 on the upcoming rally