Sunday, 15 April 2012

Monthly Index Cycles - bullish trend ending?

With the weekly cycles clearly turning bearish, lets look at the most important cycle of all, the monthly!

IWM, 6yr, monthly (representing Rus'2000 small cap)

We have clearly broken the October trend, first bearish target would be the 10MA just a touch under 76.

Nasdaq, monthly

Tech' is still holding broadly over the October up trend/channel, it will certainly be vital to the bears to see April close at this level..or lower. We're only 2.6% off the recent high, and we could obviously recover that amount over just a few days.

Dow, monthly

Dow looks weak, but just like other indexes we are barely 3% from the highs. The recent weeks choppy action could merely be a shake-out week, although the weekly cycles would argue against that view.

Importantly, the MACD (blue bar histogram) cycle is now starting to rollover. So long as we close at this level - or lower, end April, we'll get a confirmed preliminary sell signal.

NYSE Composite, monthly

The NYSE comp' is always a better index to follow than the Dow or Sp', due its much greater number of included elements. An important aspect to recognise is that the Comp' never did break above its May'2011 high, in fact, it really didn't get that close at all. The MACD cycle is looking very weak at the 0 line, and other indicators offer a teasing sign of bearish rollover signals by month-end.

SP' monthly

Very much like the Dow, we have the first sign of a bearish rollover, but since we're only half way through the month, we could still close very differently. As I've noted many times before, the entire formation could be a giant 3 year H/S formation..and we could be at the top of the RS. By definition, if its a H/S..we should be breaking under the October low sometime later this year or early 2013.

Transport, monthly

This extremely bearish sector has been stuck for over 3 months now, just over the big 5000 level. The transports sure won't stay in this range forever...sometime soon, its going to break, the only issue is which way?

Whether you are bullish or bearish, the direction in which the transports breaks will be a key indicator of the subsequent 3, 6, even 9 months across the main market.


We're only half way through April, so all these bearish candles could close flat..or even positive. How we close April we be far more important than where we are right now.

I would argue that if we do manage to close April at these levels or lower, then we'll get the first big sell signal we've seen since last summer. Of course, just as important, the bears will want to see follow through confirmation in May. If we do get that confirmation, there will be a real chance of Sp'1150 later this year. The H/S formation - if that's what it is, would suggest significantly lower than 1150, but...first things first, lets see how April concludes.