Since 2015’s broad topping pattern, equities have frequently moved sharply in both directions. The extreme nature of the moves makes predicting the day-to-day markets extremely difficult, which is why traders find it so difficult to profit in an environment like that we have today. In the short term, however, Daily Cycle timing and the market’s overbought status greatly favor a reversal and decline toward the next DCL.
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Talk of a bull market is cheap, however, so we need to see Cycle evidence develop before we buy the bullish case completely. For now, traders should focus on the highest probability event, an Investor Cycle Low in May. This should provide Short opportunities in the near term, and Long opportunities after the bottom. In fact, the buying of the ICL should be enormous!
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In this case, the rally has allowed the market to reset to a position where a sell-off into a deeper, final ICL can begin. There is always the chance that a market will go against a well-defined Cycle picture by rallying prematurely without a clean final Daily Cycle low, but that’s the exception and not the rule. At present, it does not look good for the bulls, and the Cycle count does not support any type of bullish outcome. I expect that equities will decline into a mid-March ICL before being treated to a large, counter-trend rally.
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