The Bulls are charging there way back, but it is still my opinion that this is merely a counter-trend move. By counter-trend I mean that we are still officially in a bear market with a trend that should go lower from here. The 10 period monthly moving average is now showing 2011 as the S&P 500 cash high. So until I have a monthly close above this number I can assume that it is only a matter of time before the recent low of 1810 breaks.
Historically the 10 period monthly moving average is the place that acts as resistance in all bear markets. Of course, no system or indicator is right all the time, but it is hard to argue against the fact that we are certainly overdue a bear. Therefore, in my judgement, it is only a matter of months, not years before we will see one. A bear market is categorized as a 20% or more correction, so that takes the S&P 500 down to 1707 from it’s 2134.72 high made in May 2015.
Central banks have done a good job of supporting the markets around the world, but even central banks will not be able to stop the inevitable force of market cycles. Perhaps we will go higher, and even carry it into 2017, I just don’t think this will be the case.
The strong move higher in the last three weeks will start to wane by the end of this week. As nothing goes straight up for too long. I will send out another update at the end of the month/beginning of April.