Time For A Cycle Low?

The S&P 500 has a very consistent cycle. Looking at its daily chart over many years, with few exceptions you'll find a short-term low set every 1 to 3 months, averaging out around 1-1/2 to 2 months. The Stochastics indicator on the S&P's daily chart helps identity the short-term lows. Matching up the indicator lows with the chart shows the rather regular, predictable pattern.

The most recent short-term low was on December 16th. This being February 27th, we are now more than 2 months into this cycle. We're getting on the high side of probabilities for a market pullback.

Of course there is no guarantee of a pullback. But you'll be hard-pressed to find many examples in the recent history of the S&P 500 where there wasn't a pullback within 2 months. There was an extended period last year. There was no cycle low from mid-April until early August – a period of 3-1/4 months. Aside from that, 2 months is pushing it for the S&P 500 (and most other major indexes).

If you want to raise the success rate of your trades, consider the probabilities when evaluating whether to enter a new position or hold onto an existing position. Right now, the odds are lower that the major indexes, and most of the stocks that make up those indexes, will head much higher. The odds have increased that there will be a pullback.

There are always individual stocks that will ignore the overall market. If one or more institutions are building a large position in a stock, they will build it over time and may ignore the overall market action. But many professional traders are aware of market cycles and, when the market becomes overextended by either price or time, they will patiently wait for a pullback to buy additional stock for their portfolios. That means buyers can suddenly become scarce, which may be a situation we'll see soon.

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, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2015 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.

The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

 

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