Because the current daily cycle is now in the timing band for a bottom, we should see an intermediate top fairly soon.
Yearly cycle corrections are major corrections, exceeded only by the four-year cycle low in severity. So once the correction begins, it should be a doozy. The severity of the impending correction will tell us whether the cyclical bull is on its last legs or not.
If the correction retraces back to—or maybe a little below—the 200-day moving average (DMA), then it will be a normal intermediate correction within a cyclical bull market.
If, however, the market were to retrace the entire autumn rally and test the summer lows, it will be a very strong sign that all the stimulus and money printing was for naught.
Keep in mind, the next four-year cycle low is due sometime in 2012. Because bear markets tend to last about a year and a half, I strongly suspect this cyclical bull will top sometime this year. In fact, the market is already forming a potential megaphone-topping pattern. This pattern of wildly expanding volatility is caused by the underlying debt cancer and inflation trying to pull the market down while the Fed tries to counter the bear market forces with ever-larger monetary stimulus at the same time.
The result is a market being whipped back and forth in larger and larger swings.
In the end, the Fed will fail and the next leg down in the secular bear will begin; only this time will be much worse than last. All the Fed will have succeeded in doing is making the problem bigger.
If people have retirement funds still invested in the stock market, I would suggest they get them out and back into a money market now. . .until we see just how far down the market drops as it moves into the yearly cycle trough.
Yearly Cycle Low Approaching
