Will Current Repeating SPX Cycle Predict Future?

Nov 20, 2009: 1:26 PM CST

I wanted to point out a clean idiosyncrasy in the current S&P 500 chart of the last three months – almost with awe.

This cycle has held up so far, and it’s allowed me to call successful predictions recently upon recognizing it earlier.

If the cycle repeats, then you have a clear roadmap to the near future.  Let’s see it and watch as to whether or not the cycle repeats into the end of November.


(Click for full-size)

The observation is as follows:  Price has made the low of the month in the first few trading days of September, October, and (so far) November.

Price has rallied without a pause – I’ve been calling it “Short Squeezes” or “Bear Traps” or “Popped Stops” – until the middle of the month – around the 20th/21st.

Price has formed negative momentum divergences into the new highs, along with dojis or reversal candles on the daily chart at the swing highs.

Price has fallen sharply, but only for about a week, into the final days of the month.

If this pattern repeats, then we could expect a minimum pullback to the 1,045 or so level into the end of November – perhaps that move down has already started.

Or – to play devil’s advocate – since more people are catching on to this cycle, the cycle will do the opposite of what’s expected, meaning price will thrust to a new high.

But without getting too deep, let’s see if  history does indeed repeat, and if it does, then let’s target sligtly lower levels on the S&P 500.

For prior posts, see the following related to this cycle and prior ‘predictions’:

Nov 17:  “Triple Measured Moves Show Market Character in SPY

Nov 16:  “A Look at Prior Peaks in the S&P 500

Nov 9:  “New S&P 500 Highs Forecast by Fifth Sprung Bear Trap

Nov 5:  “Andrews Pitchfork Update for S&P 500

As always, I keep subscribers of the “Idealized Trades” service updated of the developments I’m seeing in additional detail.

For “bigger picture” analysis and opportunities across five major markets and three timeframes, consider joining the Weekly Intermarket Report service.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

10 Comments

10 Responses to “Will Current Repeating SPX Cycle Predict Future?”

  1. Rd99Hse1 Says:

    I think you meant to say a pullback to the 1045 level, not 1145.
    Good post. And I've been following your 8.41 measured move cycle, too.
    Works!

  2. Corey Rosenbloom, CMT Says:

    Thanks Rd for the catch! I changed the number.

    It's so crazy that this has held up so consistently – I can't remember seeing such a clean short-term cycle (and I'm not usually a cycle person).

    All the best!

  3. Shuaib Arshad Says:

    My observation is that price movements do not repeat similar action more than thrice, meaning third time is usually the last, the side which has been winning gives up and other side successfully breaks the trend (of course there are exceptions), and this shows up very clearly as MACD divergence. Hence my speculation is that this is the last time we are seeing such regularity.

    One more argument against continued repetition is that now a lot of traders have observed this pattern and at least some of them will assume that it will repeat and trade accordingly. When something becomes so plainly obvious, it hardly ever works.

  4. * Fibozachi * Says:

    '3 strikes and you're out.' Guessing that it's done. Great highlight Corey; note how the VIX has seen a very similar xx/02 each month (VIX and SPY each had two or three 21 day harmonics in there as well, yet VIX has been screaming something different of late.

    http://tinyurl.com/ye6wmgh

  5. Rd99Hse1 Says:

    I think you meant to say a pullback to the 1045 level, not 1145.
    Good post. And I've been following your 8.41 measured move cycle, too.
    Works!

  6. Corey Rosenbloom, CMT Says:

    Thanks Rd for the catch! I changed the number.

    It's so crazy that this has held up so consistently – I can't remember seeing such a clean short-term cycle (and I'm not usually a cycle person).

    All the best!

  7. Shuaib Arshad Says:

    My observation is that price movements do not repeat similar action more than thrice, meaning third time is usually the last, the side which has been winning gives up and other side successfully breaks the trend (of course there are exceptions), and this shows up very clearly as MACD divergence. Hence my speculation is that this is the last time we are seeing such regularity.

    One more argument against continued repetition is that now a lot of traders have observed this pattern and at least some of them will assume that it will repeat and trade accordingly. When something becomes so plainly obvious, it hardly ever works.

  8. * Fibozachi * Says:

    '3 strikes and you're out.' Guessing that it's done. Great highlight Corey; note how the VIX has seen a very similar xx/02 each month (VIX and SPY each had two or three 21 day harmonics in there as well, yet VIX has been screaming something different of late. Hopefully, Robert Miner and Pesevento & Jouflas are smiling at each of us.

    http://tinyurl.com/ye6wmgh

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