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Stocks Begin Alpha Phase Decline

ByErik McCurdy
Published 08/24/2012, 05:28 PM
Updated 07/09/2023, 06:31 AM
BIG
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AH
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The S&P 500 index closed sharply lower, Friday, retreating further from recent highs of the volatile uptrend from June near previous long-term highs of the cyclical-bull market. Technical indicators have weakened and they are now neutral-to-slightly-bullish overall on the daily chart, suggesting that direction is in question with a slight upward bias. The power uptrend from late July created an extremely overbought, short-term condition and, should it come, a close well below the middle of the Bollinger bands near 1,399 would favor a move down toward uptrend support at 1,362.
SPX: Technicals Weaken
With respect to cycle analysis, the sharp decline Friday generated a cycle-high signal, confirming that the alpha high (AH) of the current short-term cycle occurred on August 21 as predicted by the cycle-high setup that formed earlier this week.
SPX: Cycle-High Signal
The magnitude and duration of the alpha-phase rally from late July favors a continuation of the violent, choppy price behavior that has persisted since early June. From a big-picture perspective, projected investment returns based on the highly reliable valuation methodology remain extremely poor and stock-market risk remains in the worst one percentile of the past 80 years -- from both long- and intermediate-term perspectives -- so we remain fully defensive.

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