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Stock Market On Verge Of Crash

Published 01/27/2016, 11:52 PM
Updated 07/09/2023, 06:31 AM
US500
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Last weekend, we noted that the cyclical top in the stock market had entered an important phase of its development. The massive distribution pattern that has been forming on the S&P 500 index since 2014 indicates that the cyclical bull market from 2009 likely terminated in July of last year.

SPX Weekly 2013-2016

The potential cyclical downtrend from July is testing critical support in the 1,880 area on the SPX. A subsequent weekly close well below that level would signal an acceleration of the decline into a true market crash and predict substantial additional losses.

SPX Weekly with Cyclical Downtrend Confirmation

From a short-term perspective, we have been monitoring closely the character of the latest cycle that began last week. We are 5 sessions into the alpha phase rally of the current cycle and the rebound has struggled to advance during the last 3 sessions, suggesting that the alpha high (AH) may have formed yesterday.

SPX Daily

The confirmed formation of the latest AH after only 5 sessions would be an extremely bearish short-term development that would predict a quick move below the critical long-term support at the 1,880 level on the weekly chart. Therefore, it will be important to monitor stock market behavior closely during the next several sessions.

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