Current position of the market

SPX: Long-term trend – The bull market is continuing with no sign of a major top in sight.

Intermediate trend – Soon coming to an end.

Market Overview

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

This is some bull market, huh? And it does not look like it will give up the ghost anytime soon! The probable cause of this strength will be discussed later, but for now, there are good reasons to think that it is approaching a significant correction; so this is the time for the bulls to exercise some caution as the upside potential appears to be limited. However, oweverHowever it won’t happen next week. For now, it looks as if we need to go a little higher before we make another short-term top. And the next correction may not be ‘it’, either.

The weekly indicators are still too strong for anything really serious to take place right away. The weekly chart of the SPX shows no sign of long-term deceleration and, for that matter, nor does the daily. The 1X Point & Figure chart is showing some congestion, but we need to see more on the 10X in order to ensure a decline of consequence. This could happen over the next two or three weeks since we are nearing a short-term top which should be followed by a short-term correction and by another rally — a process that could add enough Xs and 0s to the 10X chart to form a top capable of producing a decline of a hundred-plus points.

SPX daily chart:

The 1810 low of January 2016 was most likely caused by the 7-year cycle which also bottomed in March 2009. But its effect on the market could not have provided a bigger contrast. Obviously a larger cycle (perhaps 40-yr) was also involved which produced the kind of weakness that we saw in the last bear market. This is the only factor that could be the cause of the strength that we now see in the market. This is why we should not expect a major top to come anytime soon. Also, if the 7-year cycle did make its low two years ago, we should not expect an important top to occur for at least another year or even more. With the 7-year cycle still in its adolescence, we can also understand why the 40-week cycle which made its low in August had such a small impact on prices, and why it is still pushing us higher and higher. It, too, is still early in its phase