Editor’s Note: Today, we’re sharing a guest insight from colleague and market timer, Mason Sexton. For the past four decades, Mason has specialized in timing the tops and bottoms of the markets. And his institutional clients pay him thousands of dollars per month for this analysis. Today, we share a sample of Mason’s recent work. As he says, SPY is topping out against a “Master Cycle.” Read on…
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Dear Reader,
My name is Mason Sexton. For the past four decades, we have utilized a unique type of analysis to forecast – sometimes down to the day – the ups and downs of the market. Today, we see an important top coming for the S&P 500.
We expect the coming correction in stocks will take many by surprise. That’s why we’re writing to you today. Below, we share our analysis.
But first, a warning…
Our analysis will be very different from what you are likely used to. Some of these terms will be entirely new. Some may even sound incredible. But rest assured, we have used this exact same analysis for the better part of four decades to predict the tops and bottoms of the market. It’s how we accurately predicted the 1987 top and the subsequent “Black Monday” crash.
And now, we’d like to share this research with you.
The Cycles of Markets
It is our firm belief that, like the wind and the waves shaping a coastal beach, long-term cycles direct the future of the stock market. Identifying these cycles and their relative influences gives important clues not only to the direction of the market but also to important trend change dates.
This study of cycles has been a bedrock of our analysis for decades. And one of our shorter-term cycle models is pointing to a top in stocks right now.
The short-term cycle model has had early June as a peak in the market for several months now, with a sharp decline into at least June 15 possible as the current rally runs out of gas in the coming days.
Early June is typically a seasonal turning point which can run into the next “natural” trend change associated with the Summer Solstice on June 21.
The past three days of consolidation in the S&P 500 is some indication that the uptrend is indeed “running out of gas.” The S&P 500 – as measured by the SPDR S&P 500 ETF (SPY) – has tested the lower boundary of the $430-437 range and finally broke through this morning.
It would have been quite unusual at this point for the index to have “failed” to run the stops at this juicy triple-top barrier, where many investors had undoubtedly placed their buy stops and the algos were programmed to strike.
Not to mention, there is the August 17, 2022, high at $431.76 which remains the next critical test. All of this leads us to believe that a stop run to $433-437 “next resistance” is likely.
But from there, the most likely direction for stocks looks to be down. That’s because the S&P 500 looks to be running out of time.
Price Is Time and Time Is Price
A key concept that many struggle with is understanding that price and time are equal. They are the same thing. Price is time. And time is price.
After all, it is only with the changing of price that we might understand time (a stock was $5 yesterday, but $6 today). And we may think of time as an organizing principle. It is only through the elapse of time that support and resistance levels are created in price.
And as we said, we believe stocks are running out of time…
Specifically, we look at what we refer to as “time cycles” from important lows and highs. These cycles are highly predictive as they often forecast important trend changes.
Stocks are approximately 90 days from the March 13 low and 240 days from the Oct. 13, 2022, major low. Both cycles are expiring between NOW and early next week, suggesting that the current rally in stocks will not last much longer.
This is in addition to the “Master Cycle” or annual Solar Cycle which saw an important high on June 8 last year, followed by a decline of 13.1% in the following 11 days. This is all occurring against a backdrop of narrowing breadth and diminishing volume in stocks.
Finally, the short-term cycle model shows the likelihood of a sharp downturn in the stock market by no later than next Thursday.
All of this paints an ugly picture for the near-term direction of stocks. And we suspect many investors will be caught off guard by the sudden downturn.
So, please, keep an eye on stocks as we head into next week. And if you enjoyed this research, we would invite you to learn more about our strategies at New Paradigm Research. You can learn more right here.
Regards,
Mason Sexton
Editor, New Paradigm Research