Bigger index cycles warning of trouble

Whilst the main indexes are trading a mere 4% from the QE3 spike highs, the bigger index cycles continue to warn of trouble into year end. The weekly charts suggest a brief move as low as sp'1345/20, whilst the monthly charts suggest sp'1200/1175, the latter of which would probably equate to VIX back into the 30s, if not 40s.


sp'weekly2, rainbow

sp'monthly, rainbow

Summary

With Monday being a somewhat choppy day, Mr Market is clearly waiting to find a direction. Once we get past the election, the market will surely have chosen whether to break >1440..and proceed to new index highs, or..to have broken 1400...and take a swift trip to the low 1300s.

Rather than getting lost in such daily noise though, I remain trying to view things from a bigger perspective. The weekly charts do suggest if we can get a daily close under the key cycle low of sp'1397, then we should see a further 4-6% decline across a few days.

My best guess is that if we see the lower 1300s, we'll then see a bounce back to 1400/25, before a much more severe drop. A close parallel is the pattern from summer 2011.

I will continue to keep noting, the bears are yet to put in a lower high on the bigger weekly/monthly charts. Until we see a break lower, a bounce, and THEN a lower high, any potential collapse wave (like May'2010 or July/August 2011) seems very unlikely.

Goodnight from London