Two More Months of a Bull Market?

Stan Harley |

Hesitation at SPX 2,062.50

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Despite Friday's minor hesitation at the 2,062.50 price octave basis, the S&P 500, the benchmark indices are on the march – with new all time highs coming to a theater near you.    

The S&P 500 found recent support at the center 1 X 1 angle shown. Price has now moved back up to tag the upper 1 X 1 angle shown in light blue – coincident with the 2,062.50 price octave. Although very late in the cycle, this bull market has at least two more months in my judgment before Uncle Bear takes hold.

The structure in the New York Composite appears to be contained within what Edwards and Magee would call a “symmetrical triangle.” I previously characterized the structure as a “Gann Rule of Four” pattern but given the structure we now see – price contained within a band of lower highs and rising bottoms – I believe the “Rule of Four” is inapplicable now. The best moves up (or down) out of a symmetrical triangle occur when price breaks out decisively somewhere between one half and three quarters from the left end of the apex. That breakout is coming soon – and should see the NYA surge well above 11,000.

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Long Term

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Over the last couple of years in my research I have found strong evidence of two long term cycles – 84.3 years and 49.2 years – both of which lead to 2015 as a defining pivot point for a major market top. Four so-called “manias” have occurred over the last four hundred years. The Dutch Tulip Mania of February 1637 appears to be the Genesis Point in all cases. The chart above is appended with the London market for data prior to 1792 – the beginning of the U.S. stock market.

At first glance, the 84.3 year pattern is not readily apparent. But I know to examine a market cycle from its duplex function – and look for 1.236 / 0.809 expansions / contractions in that sequence. 84.3 years represents what I call the baseline cycle. Its duplex function – 168.6 ( = 377 / √5) years – underwent a 1.236 expansion (very common) to 208.4 years. That 208.4 sequence was then split into two subcycles of 115.2 and 93.2 years (0.553 and 0.447). Note that my regression analysis corroborates this pattern very well. We are presently three standard deviations past the ideal turn point in this cycle. We’re not just due – we’re overdue.

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The Dow Jones Industrials catapulted smartly above the 17,500 level this week. Price has stalled briefly at the 20 day moving average. I don’t look for much hesitation here;  quite the contrary, I fully expect that we will see the Dow Industrials in new high territory very soon – perhaps as early as next week. The upper pattern boundary of the rising 1 X 1 angle has contained the structure in this index for more than two years. I would expect the push to new highs will see a modicum of resistance where price again tags that upper 1 X 1 angle my computer has drawn in maroon. We’ll see the DJIA back over 18,000 here very shortly.  

Treasury Bonds
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Further all-time lows in yield  – and new all-time highs in the TLT Exchange traded fund as well. Yet to be confirmed, but we may have a potential 0.618 / 0.382 fibonacci ratio setup that could put the breaks on this record-setting move.
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 Precious Metals

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Comex gold may be setting up for a 0.382 – 0.236 – 0.382 ratio reversal as well. The pattern would certainly appear to reflect that. Ultimately, I look for price to tag the 1,375 area in this counter-trend move to the upside. Recognizing I missed this upmove, I’m content to stand aside, nevertheless awaiting the next shorting opportunity.

 

 

 

 

 

 

 

Each month, Stan Harley publishes The Harley Market Letter, a newsletter that provides advanced technical analysis of stocks, bonds, and precious metals. This is the latest update to the Harley Market Letter for January. Want to learn more from acclaimed market analyst Stan Harley? Visit his site and subscribe to the full Harley Market Letter.

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