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SPX Do or Die? What Do The Cycles Have to Say?

SPX Do-or-Die "Maginot Line" Daily Chart

SPX Do-or-Die "Maginot Line" Daily Chart

With most major world indices going back on daily trend-momentum buy signals, the main question now is whether this marks a short term reversal, or just a very short term reaction. With the weeklies in the main still on sell signals, there is a distinct possibility for a very short term counter trend reaction prior to a resumption of the downtrend. On the other hand, the daily could turn the weekly higher if indeed we have seen an important short term low.

From a cycle standpoint, when doing a stochastic cycle analysis on the last 5 months or so, it looks like a short term low may have have already been put in.

SPX Full STO Cycle Study

SPX Full STO Cycle Study Chart

RUT Full STO Cycle Study

RUT Full STO Cycle Study Chart

NDX Full STO Cycle Study

NDX Full STO Cycle Study

The quick and easily noticeable standouts in the last three charts are the increasingly shallower "dips" reversing with bullish Class A divergences out of oversold Full STO readings. As a result, first line of defense keys to watch going forward should be the NDX for a breakout to new highs and downtrend breaks on the RUT and SPX.

We see the same cycle phenomenon in Europe and Asia as well.

STOX5E Full STO Cycle Study

STOX5E Full STO Cycle Study Chart

SMI Full STO Cycle Study with H&S Top or Double Bottom Range Highlighted

SMI Full STO Cycle Study with H&S Top or Double Bottom Range Highlighted

NIKK Full STO Cycle Study

NIKK Full STO Cycle Study

Again, we see price has held up rather well in Europe in general, but the NIKK, being the laggard in Asia, shows the opposite, with the Full STO already having reached overbought. While the cycle remains constant across all indices I follow, the big question has to do with just how strong of an up-cycle we are witnessing. If the NDX and SMI were to break above recent resistance levels in tandem with the rest of world indices rallying to new short term highs, I would be inclinded to back off of short positions in a hurry (keeping in mind the technical "damage" that would also mean for the bear case), but the NIKK might be giving us a heads up that things might not be "up, up and away, smooth sailing" yet again, in spite of the fact that the leaders from the last 10 months have held up so well into the recent cycle low.

A breakout higher and resumption of the trend higher would assume that the intermediate term cycle is still up. If, however, the intermediate term cycle is down, what we may have just seen is a short term cycle low that will soon be followed by a left translated short term cycle high, which, in turn, could be followed by a new short term cycle low below the most recent lows, with a price break of those most recent lows coming sooner than most bulls may expect. As I see things right now, world equity markets are at a critical crossroads that could go either way, either up or down, but with the weeklies on daily trend-momentum sell signals, and the majority of larger cycles all cycling down, I'm still leaning towards the possibility of a break lower until I get just a bit more evidence to the contrary.

SPX 10 Year Weekly Log Chart

SPX 10 Year Weekly Log Chart

SPX 6 Year, "Late Cycle, Upside Looks Limited" Chart

SPX 6 Year, "Late Cycle, Upside Looks Limited" Chart

 

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  • wolachuk.com on September 03 2018 said:
    its 9/4/18 and its still a DO

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