Chart 1: The new 20-week cycle could run higher into late May. The current 40-day cycle is now about halfway through.
I didn’t expect new all-time highs—my plan was for a rejection at the golden pocket retracement. Instead, a mix of CTA driven mechanical buying and Trump playing the market like a violin produced the blow-off top I’d anticipated back in February. The market always finds a way to humble you.
From a Hurst cycle perspective, the S&P 500 may still have several percent of upside left. That said, I’m not chasing it. As in February, I’ve stepped aside—risk/reward isn’t compelling for my multi-month holding framework, especially with weekend headline risk in play.
Timing-wise, the next 40-day low is due around May 7 (Thu). That should provide clearer insight into structure—namely the depth of the pullback and the strength of the rebound into late May (Chart 2). This sequence would then feed into a larger decline toward a higher-degree summer low. Leading indicators continue to point to a more meaningful downside move in the weeks ahead, so I remain heavily in cash.
Chart 2: Options expiration (OPEX) often acts as a pivot, either on the day itself or a few days after. Next 40-day low due around May 7 (Thu), followed by a rebound into late May.
Short-term models have triggered a buy signal. If you’re leaning bullish, the new 20-week cycle could extend into late May, including a typical retest of the May 40-day low. However, given the negative pressure from the dominant 3.5-year cycle, my base case is that this rally is a false breakout—likely forming another divergent top and unlikely to persist beyond April.
It’s extremely rare for a 40-week cycle (top panel, Chart 3) to undercut its prior low and still go on to make new highs. In S&P 500 history, I could identify only one comparable instance. The usual structure in such cases is an M-shaped pattern with a clear bearish bias, as highlighted by the arrows.
Chart 3: It’s rare for a 40-week cycle to undercut its low and still go on to make a new high.
Bottom panel shows 20-week cycle, expected to synchronize with the 40-week cycle around July.
That’s exactly how I expected the current 20-week cycle to unfold. That said, we now need price action to confirm emerging bearish signals. A bullishly configured cycle could still extend into June. While models have triggered a buy signal, participation remains narrow and volume is light. In my view, a downside resolution over the next few weeks remains the highest-probability outcome—but it still requires confirmation. Cycles define the setup; price action and models provide the trigger. The bottom panel shows the 20-week cycle, which I expect to synchronize with the 40-week cycle around July.
To illustrate what typically happens after a 20-week cycle low when the 40-week cycle has already failed, we can look back at Q1 2022 (Chart 4). In January of that year, the price made a lower low, confirming that the 40-week cycle had failed and signaling the start of a larger-degree correction.
Chart 4: Typical outcome after a 20-week low when the 40-week cycle has already failed.
This was followed by a series of bounces that retraced some of the decline but failed to make new highs. The market then rolled over and established new lows. This pattern is typical behavior roughly 99% of the time.That’s why I’ll be watching closely to see whether the current breakout turns out to be a deviation that ultimately resolves to the downside over the next few weeks, especially with the longer 3.5-year cycle exerting downward pressure.
I'm watching for a potential Wyckoff upthrust after distribution (UTAD) to play out over the next few weeks (Chart 5). For the bulls, it's critical to keep any pullbacks shallow and hold above the 2026 opening price at SPY 685.71, as well as above the overall consolidation range.
Chart 5: Watching for a potential Wyckoff UTAD to unfold in the coming weeks.
Doing so will help avoid the setup looking like a classic false breakout. I've also overlaid the 2022 bear market in yellow for reference, in case the bearish thesis unfolds and we see a similar structure develop.
.PNG)
