Stock Market Commentary

A cycle high signal was generated this week, indicating that the intermediate-term high of the cycle from September likely formed during the week ending October 16. We are 2 weeks into the decline phase of the intermediate-term cycle that began during the week ending September 25.

An extended decline phase that moves well below the last intermediate-term low at 3,209 would reconfirm the current bearish intermediate-term trend and favors additional losses. Alternatively, a quick rebound followed by an extended rally phase that moves up to meaningful new highs would signal the likely transition to a bullish intermediate-term trend.

S&P 500 Index Weekly Chart Analyses

The following technical and cycle analyses provide intermediate-term forecasts for the S&P 500 index. For short-term outlooks, see the latest short-term forecast.

Technical Analysis

The index closed sharply lower this week, retreating from recent highs of the uptrend from March. Technical indicators are neutral to slightly bearish overall, suggesting that direction is in question with a slight downward bias.

Cycle Analysis

A cycle high signal was generated this week, indicating that an intermediate-term cycle high (ITCH) likely formed during the week ending October 16. We are 2 weeks into the decline phase of the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending September 25. An extended decline phase that moves well below the last ITCL at 3,209 would reconfirm the current bearish translation and favor additional losses. Alternatively, a quick rebound followed by an extended rally phase that moves up to meaningful new highs would signal the likely transition to a bullish intermediate-term trend. The window during which the next ITCL is likely to occur is from January 15 to March 19, with our best estimate being in the February 12 to March 12 range.

• Last ITCL: September 25, 2020
• Cycle Duration: 5 weeks
• Cycle Translation: Bearish
• Next ITCL Window: January 15 to March 19; best estimate in the February 12 to March 12 range.

• Setup Status: Cycle high setup occurred this week.
• Trigger Status: Cycle high trigger occurred this week.
• Signal Status: Cycle high signal was generated this week.
• Stop Level: None active.

Intermediate-term Outlook

• Bullish Scenario: A rebound and weekly close well above the recent long-term high at 3,510 would reconfirm the uptrend from March and forecast additional gains.
• Bearish Scenario: A weekly close below current levels would predict a return to the 50-week moving average at 3,139.

The bearish scenario is highly likely (>80 probable).