Earlier this week, I sent you a few excerpts from my weekly Market Update that goes out to Wall Street Examiner Pro Trader subscribers. Unfortunately, I forgot to include the most important chart.
It’s one that I’ve been using for decades… and it’s my go-to for keeping me on the right side of the major trend, and identifying when that trend is changing. It may be the most important chart I construct for just that reason.
For instance, here’s how it performed while calling the recent upleg from the big break in February 2016. Back then many analysts had turned bearish. I had been bearish since before the August 2015 break.
But the indicators on this chart began to tell a different story soon after that February 2016 break. I noted on April 16, 2016 that, “The market signaled a new 2, 3, and 4 year cycle up phase by closing the week above the downtrend channel from last May.” The S&P 500 was then at 2080.
I reiterated that the indicators were still bullish on August 6, 2016. “3-4 year cycle indicators have edged through the long term downtrend lines. This suggests that this cycle is early in an up phase.”
Then on February 26, 2017 I suggested that the market would continue higher until at least 2018. “3-4 year cycle momentum has broken out from an apparent base pattern dating from Q3 2015. The next momentum peak is ideally due at the end of 2017, but prices usually climb for months after momentum peaks. The 3-4 year cycle price high is ideally due no sooner than 2018 and as late as 2019. These patterns suggest that the market is going much higher.”
And indeed it did.
But now, the indicators are changing and the market has told us that the party is over.