Most major U.S. stock market averages are up between 7% and 13% since their August 24th panic lows. However, I now believe that this rebound is a counter trend rally, and that the early summer all-time highs in most major indices will NOT be exceeded (or even tested).
In my technical work, I see several longer term stock market cycles peaking between now and the end of this month.
On the fundamental side, I would be very surprised if 3rd quarter corporate earnings reports provide significant upside support for stocks, and I would not be surprised at all if 3rd quarter earnings reports were actually negative relative to expectations, on balance. While the energy and mining sectors may be bright spots immediately ahead, the rest of the market looks poised on the precipice of a major downturn which will significantly violate that August 24th panic lows.
While I think my computer trading system did well in navigating this latest rally, I now believe that the weekly chart sell signal in the S&P 500 Index from July 24, 2015 is the dominant signal (see chart below). The counter-trend rally which has unfolded since the panic lows of August 24th looks tired to me.
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| S&P 500 Index Weekly Chart with 75-Week & 150-Week Moving Average Lines & Computer Signals |
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