Coming in October: Next Major Cycle Low
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.