Four Cycle Turns Warn of a Stock Market Top in March 2012

By: Robert_McHugh_PhD

There is a lot of cycle evidence that suggests a top is coming in March 2012. How significant a top is hard to say, but the odds are the coming decline will be at least in the 10 percent area. If this coming top is the top of Grand Supercycle degree wave {III}, then stocks will begin a decline that could retrace 50 percent or more of the market over the next several years, with large chunks of decline occurring incrementally, followed by normal 40 to 60 percent retracements as stocks work toward significantly lower levels. This weekend we will present this cycle evidence, which we believe is compelling.

First of all, the last phi mate turn date was in December, which led to a two month rally of significance. It was a major phi mate turn. March 7th is the next phi mate date, and the only phi mate turn date since that December turn. It also is a major phi mate turn, meaning its phi mate, its partner date, was also a major turn.

There is also one of the largest Fibonacci Cluster turn windows we have ever seen due the first 2 weeks of March 2012. We have found that when there are a cluster of trading days within a short period of time that are a Fibonacci number of trading days from a key closing top or bottom of the past, there is a higher than normal probability that a significant trend turn is likely coming around that cluster time period.

In early September 2011 we identified a Fibonacci Cluster turn window that was telling us a significant trend turn was likely over the 7 trading day period from September 23rd to October 3rd a day. On October 3rd, 2011, the last day of this Cluster, the Industrials had the closing low for the decline from early September at 10,655.30. That was a bottom which has led so far to a rally of 2,357 points in five months. This Fibonacci Cluster turn window only had four previous tops or bottoms a Fibonacci number of trading days from this cluster, and it worked quite nicely at identifying a strong new trend.

Prior to that, the cluster turn window from August 1st through August 8th produced the August 10th bottom of the crash, while the cluster turn window from August 23rd through August 30th a few days, produced the September 1st top.

We now have another Fibonacci Cluster turn window that has nine!!! previous tops or bottoms that were a Fibonacci number of trading days from this coming turn window, which runs from February 23rd, 2012 through March 22nd, 2012. The mid-point of this range would be March 8th, very close to our March 7th phi mate turn date. This is one of the largest number of Fibonacci Cluster related mates we have ever seen. Hard to say what this means, but it adds significance to this coming period of time as being an important market turn.

Also in March 2012, we have a coming Major Bradley model turn date. The last major Bradley model turn date was in late December, which has led to a significant rally over the past two months. All Bradley model turn dates between December 2011 and the coming March 16th turn were minor turns, and did not significantly affect the intermediate or primary trend of the market, which of course has been up. So now, in March 2012, we have two independent reliable major cycle turn dates within a week of each other. They are most likely pointing to the same one turn, and we are talking top here.

Then there is also the Spring Equinox annual cycle turn date. This weekend we present a chart and analysis of the past turns this Spring Cycle turn has produced.

Typically the stock market makes some of its most significant trend turns during the month of March each year. The charts above show this March turn phenomenon.

Since 2000, there have been ten years where a stock market significant turn occurred in the month of March. The two years it did not happen precisely in the month of March, 2006 and 2010, there were major turns in April and May, close to March. All turns were significant. Even the smaller turns were at least 100 S&P points (1,000 equivalent Dow Industrials points), but most turns were much more. I have no idea why this happens. There is something about the spring equinox that affects mass psychology of market participants.

In 2012, markets are set up for another significant turn, a top. Here we go again.

Then there is a periodic cycle turn date that a subscriber, Christian Gustafson, has pointed out for us. We show charts and analysis for that cycle turn date due in March 2012 next.

These charts tell us a cycle interval of approximately 5 months that has been very good at identifying stock market turns over the past decade. Not all turns were major, but many of them were.

What makes this cycle turn interval so interesting? It points toward a stock market top in early March 2012.

What all this is telling us is that the aging and weakening rally we have been watching could last another week or two, but then should end and be followed by a sharp and volatile decline that retraces most or all of the gains from the past two to four months. There is an alternate possibility that the coming March decline will merely be a corrective wave 4-down move, with one more large rally leg, wave 5-up taking stocks higher into the autumn 2012 and a Grand Supercycle degree wave {III} top that kicks off a decade of Great Tribulation.

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by Robert McHugh, Ph.D.  
technicalindicatorindex.com

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com.

The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2008, Main Line Investors, Inc. All Rights Reserved.

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