Last week’s projected minor top was very brief and shallow, and quickly followed by a 47-point rally to a new high. So far, the upside projections have worked well and have been spot on. This now brings us to the next minor top which should precede a better correction, but not necessarily “the” intermediate correction that I now feel is not very far away.  

All the anxiety about the seventh year of the decennial pattern has been for naught, so far, since the month of October is nearly over and the market is still making new highs. But the year is not over, and if October was a miss, the seventh year probably won’t be, and one should not become overconfident that the pattern will not repeat itself. There are enough signs that we are getting close to an intermediate top which has eluded us with deceitful projections, but this time, the evidence is compelling and cannot be ignored.

There is a minor cycle low due on Monday which should not bring too much weakness; but it could be enough to cause a small retracement which may be followed by another small rally before we get the next minor correction.  

Chart Analysis  (These charts and subsequent ones courtesy of QCharts)

SPX daily chart:

The uptrend which emerged from the 40-wk cycle low on August 21 has been straight up, even moving outside of the green channel last week, and continuing to remain well above the mid-major channel line from the 1810 low. Before moving above the top channel line, there were several days of deceleration which had formed a terminal pattern, but the correction which ensued was quickly bought by traders and, with the assistance on some renewed optimistic news about  “tax reform”, the index tacked on enough points to pierce through the top.  

That the market is overbought is an understatement. A quick move which exceeds the top of a channel is normally a sign that we are ready for a correction, and this is verifiable by a glance at the three oscillators at the bottom of the chart which all show negative divergence. There is also a P&F phase count whose minimum projection was already met when SPX touched 2474, on Friday, but which can extend a few points higher before we produce another minor top which should give us a better price retracement than previously, and last more than one day.