Is it Time for a Cycle High?

It's time for that chart again – the one I post about every 6 weeks showing the regular cycles in the S&P 500. The S&P 500 has a roughly one and a half month cycle. Cycles, in uptrends, are best identified by the lows. The Stochastic indicator can be helpful in identifying the cycle lows.

Marking the lows on the S&P 500 chart makes it obvious that it may be time for the market to ‘turn over' and start heading down to eventually form another short-term cycle low:

What are the odds of this happening?

Clearly identifiable cycles are not guaranteed to form every month or so. But if you look at pretty much any period of the S&P 500's recent history, you'll be able to identify about 6 cycles for every 7 one-to-two month periods. In strong uptrends, a cycle low may not be recognizable. In sideways markets with a low volume of news, the cycles may stretch out to two to three months. In downtrends, cycle highs may be easier to identify. But humans are cyclical creatures, and the market reflects the ups and downs in their emotions and risk-taking, therefore the markets produce rather regular cycles.

Since the odds are a bit higher that the equity markets may form a short-term high and fall back to form a cycle low, this is not the time to be throwing a lot of money into the market. Taking profits, cutting back positions, and adding protection (puts and/or inverse market ETFs) would all be prudent strategies for the next few weeks.

There will always be some sectors and stocks that will show strength. You can make money on the upside as the overall market is pulling back. Just do extra research and trade more conservatively until the odds favor another uptrend.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, type in www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2014 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

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