S&P 500 Index Medium Term Cycles Analysis

By: Jim_Curry

S&P 500 CASH Index
S&P 500 Cash Index - 11/30/07 Close - 1481.14
SPX CASH: 5-Day Projected Support and Resistance levels: High - 1526; Low - 1444
DEC SP: 5-Day Projected Support and Resistance levels: High - 1528; Low - 1446
SPX CASH: Monthly Projected Support and Resistance levels: High - 1513; Low - 1374
SPX CASH: Yearly Projected Support and Resistance levels: High - 1531; Low - 1319

Current analysis: The technical action that was seen around the 1415.64 swing low (from 11/21/07) did not have the right 'look' - and thus lower lows were still favored for the indexes; this was seen with last Monday's sharp drop down to 1406.10. That low did have a solid technical look - showing hard divergences between both price and breadth with the same. Those divergences then led the various indexes to a sharp upside reversal into late-week, with the SPX rallying all the way back up to a high of 1488.94, here made in Fridays session. For the week as a whole, the SPX ended higher by 40.44 points - a net gain of 2.8% from the prior week.

The Time Cycles
From the cyclic table above, the 45-day cycle is now seen as 4 days along and has flipped back to a bullish labeling. The larger 120-day cycle component is now seen as 74 days and is still labeled as bullish at this time, while the even-larger 360-day cycle is now seen as 182 days along and is also still labeled as bullish; both the 120-day and 360-day cycles are set to move to neutral in the days/weeks ahead. The four-year cycle is now seen as 1294 days along and is currently still labeled as bearish and extended.

As per the notes from recent weeks, the 45-day cycle was extended and thus overdue for it's bottom - though the notes from last weekend favored that a lower low was still out there until a better technical contraction could be seen. With the push down to the 1406.10 level in Monday's session, that was accompanied by more solid technical divergences between price and internals - which then set us up for the strong rally that we saw into later in the week. The same also should cement our 45-day cycle bottom in place - which should be further confirmed by any push above the 1491.09 level in the days ahead.

The 45 Day Cycle
The 45-day cycle's last favored bottom is the 1406.10 swing low from last Monday, which puts this particular component now at 4 days along on what should be a brand new upward phase; taking out 1491.09 in the new trading week would be the added confirm. In addition, taking out the same 1491.09 figure to the upside would also confirm a new 45-day cycle upside target to 1540.77 - 1566.45 - which would be valid above the 1406.10 level with price and until the last trading day of December (with time).
  As per the notes from some of our recent outlooks, the 45-day cycle was extended and thus overdue for it's bottom. And, once complete, a sharp rally back to the 45-day moving average or higher was the expectation - which is currently at the 1503 level at Friday's close and is dropping by about a point per day; short-term support will now move up to the 1444 level, plus or minus a few points in either direction. In looking at time statistics for this same 45-day cycle, approximately 80% in the current configuration have not witnessed their peaks being made prior to the 11-12 day mark. If seen on the current rotation, then the probabilities won't favor this particular component peaking on or before December 11-12 - but could actually hold off until well after this date range because of seasonality. The 45/120 day combined forecast with the spectral model (chart above) does not favor the next hard period of weakness developing again until after the new year.

The 120-day Cycle
The 120-day cycle has it's last confirmed bottom as the 1370.60 swing low from 8/16/07. This now puts this particular component at 74 days along at Friday's close and currently still labeled as bullish into early this month, where it will soon move to a neutral - and then to a bearish labeling later in the month.

As per the notes from recent weeks, in terms of time statistics the greater-majority of the 120-day up phases within the pattern of a ‘higher-low/higher-high' had not seen their tops made prior to the 73 trading-day mark; this had suggested the potential for this cycle to hold off it's peak until on or after 11/19/07. However, as per the notes from recent weeks the fact that this component negated it's most recent upside projection (to 1628.44 - 1661.12) is a decent-odds indication that the 1576.09 swing top from back in October was in fact the last peak for this cycle. Even said, that is never a guarantee, as prices so far have held above the key 1370.60 level - and thus there is still some outside shot that the current 45-day up phase could actually carry this index to new all-time highs again between now and year end. Right now my current assumption is that the current rally will hold below the October peak - and then will be followed by a run back to or below the recent lows again at some point on or before early-to-mid February, which is when this 120-day component is projecting it's next bottom.

The 360-day Cycle
The 360-day cycle's (chart, above) last confirmed low on the SPX is the 1364.06 swing bottom of 3/14/07, which puts it at 182 trading days along at Friday's close and currently still labeled as bullish; but, as with the smaller 120-day component -  it is soon due to flip to a neutral labeling in the days/weeks ahead. In terms of time, the next bottom for this cycle is currently scheduled for April of 2008, with a plus or minus variance of 4-6 weeks.

The 1370.60 level - which is both the August low and the last 120-day bottom - is the current dividing line with this 360-day component. In other words, holding above the same will allow for the SPX to make some test of the all-time highs in the days/weeks ahead, but - if broken - the same would signal that the peak for this cycle is in place. It would also signal the likelihood of a larger correction in progress, such as with the larger four-year component - which is extended and thus is overdue for it's normal percentage correction off the top. For now, however, the probabilities favor the recent swing low of 1406.10 holding - and for some test of the October highs between now and year end, though ideally holding below the same - then to be followed by a try at the lows again by February with the 120-day component

Short-term
Shorter-term, the minor cycles either posted a high in Friday's session on the SPX - or, alternately, will do so very early this week. Once
complete, the probabilities will favor a retrace back to or below the 9-day simple moving average on this index - which is also very close
to the current weekly projected support low of 1444 SPX CASH. In terms of time, the next minor bottom is due near December 6-7. Once that (10-day) low is complete, then rising prices should be seen into and just after the December 11 fed meeting. Stay tuned.

By Jim Curry
Market Turns Advisory
email: jcurry@cycle-wave.com
website: http://cyclewave.homestead.com

Jim Curry is the editor and publisher of Market Turns advisory, which specializes in using cyclical analysis to time the markets. To be added to our mailing list click HERE

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omissions. Copyright 1998-2007, Jim Curry

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