Globe editors have posted this research report with permission of Phases & Cycles Inc. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
Claims by some market analysts that a new bear market is already underway require much more confirming evidence to the downside. Our view remains that this is a Leg 4 correction in the bull market. The current battle between bulls and bears does have a silver lining – the boundaries of the playing field and the rules for declaring victory are now very clear for both sides.
The boundaries: Looking up, the now broken trading ranges of the spring/summer period are a formidable barrier. The S&P 500's zone from 2,040 to 2,135 is an area of overhead resistance and potential supply. Looking down, the immediate key levels of support and demand are the lows of August 24 and 25 (1,867 for the S&P 500).
The rules of the game: The bulls will only begin to feel more confident if the S&P 500 gets back into the previous trading range. Confidence will increase further if new highs are made above 2,135. The bears will be growling with glee if the 1,867 level is taken out conclusively, and they will be even more ecstatic if the major 2009-15 bull market trend lines in the low 1,800s and low 1,700s are wiped out. In other words, the bull-bear battle continues until either 2,135 is exceeded on the upside (a bull market victory), or about 1,700 on the downside (a bear market victory).
Read the full report here.
Globe app users click here for the full report