Signals for the cob of the "scourge" market, the analyst thinks

Business Insider reports that the stock market is nearing the end of its annual "bearish" cycle and is ready to enter a new "bullish" market. One of the signals indicating the end of the previous trend is the ongoing decrease in stock volatility.

Since mid-October, the S&P 500 has seen an impressive 18% increase. However, according to analyst Kathy Stockton of Fairlead Strategies, several signals must appear for the new bullish market to be sustainable.

Stockton believes that the current short-term and long-term cycles in the stock market are leaning towards bearish on the background of the ongoing consolidation phase. Short-term volatility is likely not yet over.

The short-term impetus for the market as a whole is likely to weaken, given that the stocks of the largest companies are currently showing daily sell signals. This may bring the S&P 500 down to a support level of around 3800 points, which would mean a potential 8% drop from current levels. But if the stocks manage to continue the consolidation phase and rise by less than 1% compared to current levels, a new bullish market may be expected, according to Stockton, who identified the level of 4155 points for the S&P 500 as the key resistance level that needs to be overcome.

"If the S&P 500 index consistently closes above 4155 points, its downward trend will change, leading to a medium-term bullish cycle," explained Kathy Stockton.

And if the potential breakthrough above this key resistance level coincides with the ongoing decrease in stock market volatility, as measured by the CBOE Volatility Index (VIX), then a rally can be expected.