Last week, I wrote the following:

“… some cycles … suggest that a consolidation should take place over the next few weeks.  Minor cycle lows are due next week, and larger ones around mid-April. And then, the all-important 40-wk cycle is due in mid-May.  So the forecast made above could be altered by some corrective action before we get the all-clear signal for a new high.”

By “the bulls’ last stand” I do not mean that we are at the top of the bull market (that may be reserved for the end of the year), only that there is a good chance that the correction is about to continue and pull prices lower in a retest of the 2533 low. The reason for that is the above quote from last week. The minor cycles did affect prices last week and could even continue to do so into Monday, but the more important ones that lie ahead should not only prevent a strong recovery in the coming weeks, but they should weigh on prices until May-June.  

There is one more opportunity for the bulls to show some short-term strength and that is next week, with the help of minor cycles, and if the FOMC meeting has a bullish overtone.  In that case, we could attempt to retest the recent high of 2802, but with the larger cycles increasingly bearish into April, this should be a bounce of limited potential.

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

SPX daily chart

The bullish nature of the chart ended at 2800 when the index barely surpassed the previous high and came down hard on an important support level which combines trend lines, former congestion, and MAs. The short-term cyclical projection suggests that it should hold for a little longer, perhaps even into the end of the week, but the larger cycles due in April and then May/June should be a powerful deterrent against anything more than a near-term bounce.

After the initial correction from 2872 down to 2533, a strong rebound retraced 78% of the decline and after a pull-back, the uptrend resumed. It was now a question of how much more of a rally the bottoming cycles would permit and there was the possibility that we could even retest the former high of 2872 before turning down again. Last week’s action was a definite enough! And now the bulls are once again vulnerable to another couple of months of weakness before the index can complete its intermediate correction and resume its uptrend. We’ll leave it at that for now and discuss the possibility for a much larger decline as the end of the year approaches.