The indices had a significant 3rd quarter this year. According to Hurst’s bandpass filter analysis they have established the most recent 4 year cyclical high.
Below is a chart of the S&P 500 showing the 4 year price wave dating back to 1990. It has clearly crested and is currently cycling down.
Here is the same chart of the Dow.
Included on the charts are the 4 year wave VTLs. Historically (114 years) when the 4 year wave VTL (log scale) is broken to the downside, the price action retraces to or below the prior 4 year low 100 percent of the time! In one third of those declines the price action retraced below the prior two 4 year lows! Statistically that implies the indices are on the verge of very significant declines.
One of the more reliable indications that an 80 week and 4 year high has formed is the formation of a lower 20 week high. Below is a weekly chart of the ES futures showing the 20 week wave dating back to the 2007 high. The red arrows show the formation of lower 20 week highs at the 4 year cyclical highs followed by significant price declines. Also included on the chart is the 4 year VTL and ostensibly the 40 week VTL, both of which have been broken to the downside.
Below is a zoomed look at the above chart showing the 20 week wave cycling into a low. The price has already closed below the prior 20 week low close and there are still a few weeks before the next 20 week wave low is due based on its average period. This same analysis performed on the Russel 2000, the NYSE Composite Index, and the Value Line Index (geometric) indicates that a lower 20 week high has already formed.
It appears that the S&P 500 is the last man standing. From a probabilistic standpoint, the formation of a lower 20 week high in the ES will indicate that significant declines are in the future and the possibility that the indices have formed multi-year highs due to the fact that the next 4 year low is not due until 2016.