The State of The Trend
With the end of March and the first quarter behind us, it's time to look at the longer-term SPX charts.
The monthly swing chart shows the current upswing as being the second longest in SPX history following the 31 month long '62 - '65 upswing:
This puts the spotlight on the 50 year or Jubilee cycle and merits a closer look. In 1965 the bull run concluded on May 13th, and was followed by a 10% drop which ended on June 29th. This drop was followed by another rally which ended with the bear market of 1996 when the SPX lost 22.2% between February and October.
There are further similarities in price behavior between the two periods. In 1965 the 10% drop was preceded by price moving below the Swing angle, and dropping below the trailing stop-loss level. Currently, the SPX is already trading below the Swing angle which marked the March '15 top, but still above the monthly trailing stop-loss at around 1980:
In summary, the SP500 started and finished trading the first quarter of 2015 in a box:
Which way it breaks out of the box is likely to determine the near-term direction of the index in April. Considering that the length of the current rally is pushing the boundaries of historical precedents, even in the case of an upside breakout increased caution going forward will be warranted.