The monthly cycle based upon the S&P 500 is depicted below. There have been two buy and two sell signals in the last year and all four have been successful. The monthly cycle has been an accurate guide in 2019.
The cycle uptrend has been confirmed by new highs in the advance-decline line and by the S&P and NASDAQ price action. Below, we see the S&P breakout from a triangle formation. The usual measuring formula points to an advance of 12% to 20% from the breakout point. This optimistic projection may be unrealistic over the next two months but note that the breakout point is now support. This creates a very favorable reward/risk situation. This setup is enhanced by the fact that the market is in a strong seasonal period.
The monthly cycle tops in mid-January of 2020 indicating lower prices in 2020. This projection is reinforced by the following fact. According to the decennial pattern, years ending in zero have the lowest equity returns in the ten-year pattern. The current rally is likely to top on January 10th.
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