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|Cycle||Count||Observation||Cycle Position||Cycle Clarity|
|Daily||Day 17||Range 36-42 Days – 2nd Daily Cycle||Topped for Half Cycle – Seeking HCL
|Investor||Week 15||Range 22-26 Weeks||Aging – Approaching typical topping point
|Commitment of Traders (COT)|
|Primary Trend (Weekly Chart)||Flat- (Possible Change to Down)||Neutral to Bearish|
It can feel like an eternity waiting for a specific move to play out. For the equity markets, the first turn off the highs is the first sign of a potential topping motion in this Daily and Investor Cycle. It’s a game of patience in the end, especially when you’re waiting for a particular move to unfold.
Ultimately, I do not know if the markets have topped. I honestly have no idea if the bear market in equities will take control or if we are about to see an easy money inspired bull market rally. The fact is, nobody knows, do not let anybody convince you otherwise. The markets have been a difficult read these past 18 months and there is no confirmed trend. I am not here to make wild predictions to excite members, my role is only to discuss and highlight what are plausible possibilities along with a plan on how I aim to capitalize on them.
On the Daily Cycle chart, the S&P peaked on Day 9 and is now clearly seeking the Half Cycle Low point of what is normally a 40-day Cycle event. If the Investor Cycle topped and the bear market is to return, then that Day 9 high should remain the high and the rally out of this looming HCL should fail to make new highs. Under the bear market scenario, we should see a failed rally become the right shoulder of a short-term head and shoulders pattern, giving way to a drop of around 100 points into the next DCL.
One of my preferred secondary indicators is sentimentrader.com smart money index. It possibly confirms my bear market scenario as the market appears to be at a topping point. Historically, it is a leading indicator, with a bottom in the smart money index preceding a market top by a few weeks. Although not a long-term indicator, it is currently showing us that an Investor Cycle top is likely at this point. (more…)