The Structure Remains Stock Market Bullish -- Don't Get Shaken Out
- Jun 25
- 9 min read
It's natural for traders to feel uneasy when markets appear overextended. Short-term and momentum cycles often show extreme readings, and the immediate impulse is to prepare for a pullback. But this reactive mindset often leads to premature exits--right when the structure continues to support the bull trend. Today, we're looking at a classic case: despite short-term and momentum cycles peaking, the larger structure remains intact and bullish.
When we say "structure," we're referring to the alignment of intermediate and long-term cycles. These aren't swayed by daily noise or sharp intraday moves. Instead, they guide the overall direction of the market. As of now, both intermediate and long-term cycles are firmly rising. That means the foundation beneath this rally is still strong. And that strength often offers opportunities for disciplined traders to stay in positions or even add exposure when conditions align.
This environment is where cycle analysis shines. By studying how short-term cycles interact with longer ones, traders can distinguish between fleeting noise and genuine trend shifts. Just because momentum looks overbought doesn't mean the structure is broken. In fact, it's often the opposite: a sign of healthy, controlled bullish behavior.
Short-Term Extremes Aren't Sell Signals
Looking at the SPX cycle chart, the short-term (yellow) and momentum (cyan) cycles are indeed in the upper reversal zone. But this isn't an automatic sell signal. In bullish markets, short-term cycles can remain overbought for extended periods. What matters more is the context: are the bigger trends still rising? If the answer is yes--and today, it is--then short-term highs often lead to consolidations or shallow pullbacks, not full-scale reversals.
In fact, short-term overbought signals can be a trap for inexperienced traders. Emotional responses to these signals often lead to selling strength and missing out on continued rallies. These cycles are often better viewed as areas for caution, not exits. Traders need to monitor them, but always within the broader trend framework.
We also need to understand how price behaves in these zones. Frequently, markets pause to digest gains when short-term cycles peak. But these pauses are not reversals--they're opportunities for entry. Buying into strength may not always feel comfortable, but with the right structural backdrop, it is often the correct move. Check our post on Market Cycle Graph Confirmations: How to Avoid Getting Trapped in Short-Term Rallies for more info.
SPXL Price Action Confirms the Trend
The leveraged S&P 500 ETF, SPXL, provides a more amplified view of what's happening under the hood. All four Donchian crossover pairs--3/5, 4/7, 6/10, and 9/18--remain bullish. Not only has price stayed above key support levels, but recent action also shows a breakout from a tight consolidation range. This kind of technical behavior is consistent with a market preparing to continue its move higher.
The presence of multiple bullish crossovers reinforces the underlying strength. These moving average crossovers are not random events--they signal transitions in momentum that are sustained. When the price respects these crossover levels repeatedly, it forms a support structure that seasoned traders rely on for entries and risk management.
It's important to observe how price reacts at these zones. When SPXL pulls back to the 3/5 or 4/7 levels and holds, it's not weakness. It's resilience. These areas become launchpads for continuation, especially when broader cycles remain aligned. This is where technical confidence meets structural discipline. Check our post on Sector Rotation Strategy: Navigating Market Divergences in July 2024 for more info.
The Emotional Trap of "Too High"
One of the most common traps traders fall into is the belief that a market has gone "too high" and must come down. But markets don't move based on feelings; they move based on structure. Just because something feels overbought doesn't mean it's actually reversing. In a strong bull trend, that "too high" feeling is often a sign of strength, not weakness.
Emotional trading often comes from watching price action in isolation. Without context, a big move higher or a sharp rally can feel unsustainable. But when we understand the broader picture--the cycles, the crossover zones, the price channels--those same moves can be seen as natural progression within an uptrend.
The worst part of this emotional reaction is its timing. Traders who exit on "gut" feelings usually find themselves watching from the sidelines as price continues higher. Reentering then becomes a mental and emotional challenge, often leading to chasing and mismanagement. That's why relying on structure, not emotion, is so critical.
Bullish Traps vs. Bullish Setups
In every uptrend, there are moments that look bullish on the surface but are actually traps. These "bullish traps" occur when price appears strong in the short term, but the underlying structure doesn't confirm the move. In contrast, a true bullish setup is supported by rising intermediate and long-term cycles, healthy crossover behavior, and a clear trend structure.
One of the biggest mistakes traders make is assuming that any bounce or breakout is a sign of strength. But without context, that kind of price action can be deceiving. For example, if the intermediate cycle is flattening or turning down, and price breaks out on low volume or against a deteriorating structure, that's often a trap waiting to spring.
The key difference is confirmation. A bullish setup doesn't rely on hope--it shows itself in structure. That includes rising cycles, supportive crossover levels, and price respecting key moving averages or trend channels. If those elements aren't in place, it's better to step aside and wait for clarity rather than jump in prematurely.
Recognizing this difference can mean the distinction between getting caught in a short-lived pop and participating in a sustained rally. Traders who learn to read setups properly--rather than reacting to every pop--are the ones who grow more confident and consistent over time.
What to Do Instead
So what's the right approach in this kind of environment? It's simple, but not always easy:
Stay with the trend. As long as intermediate and long-term cycles remain bullish, your bias should lean long.
Use pullbacks as opportunities, not warnings. When price revisits the 3/5 or 4/7 crossovers, look to build or add to positions.
Respect support zones. These are your layered stops--places where you manage risk without losing sight of the larger picture.
Ignore the noise. Headlines, opinions, and emotional tweets aren't signals. The structure is the signal.
Disciplined traders don't react to short-term moves without context. They watch how price behaves around key support levels and make plans based on structure. Buying every dip isn't the goal--buying the right dips is. And the right dips come when structure confirms the continuation.
It also helps to journal or track your entries and exits, noting whether each decision was made from structure or emotion. Over time, this kind of record will reveal patterns in your own decision-making and help reinforce good habits.
Why This Matters Now
This current market setup is a textbook moment where reactive traders get shaken out and disciplined traders are rewarded. We're not seeing breakdowns in structure. We're seeing strength across the board--structurally, cyclically, and in price action.
The difference between success and failure in this environment often comes down to confidence in your process. If your process is grounded in structure, you stay engaged. If it's based on emotion, you get rattled by every swing. That's why consistency in analysis and execution is key.
It also matters because the biggest gains often come when everyone else is unsure. When cycles align and price shows strength, it's the perfect moment for disciplined traders to position themselves. Not with reckless aggression, but with confidence rooted in a solid framework. Check our post on Short-Covering Rally: Understanding the Mechanics and Impact on Market Trends for more info.
People Are Asking: Stock Market Bullish Trends
What does it mean when the stock market is bullish?
A bullish stock market means that investor sentiment is optimistic and prices are generally rising. It reflects confidence in economic growth, corporate earnings, and overall financial stability. Typically, a bullish environment is marked by strong intermediate and long-term trends, higher highs, and higher lows.
It also suggests that buyers are in control. During these periods, dips are often short-lived and met with renewed buying interest. Volume tends to support the trend, and technical indicators show upward momentum. It's not just about price going up--it's about structure supporting that movement.
A truly bullish trend also tends to shake off negative news or short-term pullbacks, which makes understanding structure even more important. It allows you to stay with the trend instead of second-guessing every move.
Can the market still go up if momentum is overbought?
Yes. Overbought momentum does not automatically lead to a downturn. In a strong uptrend, momentum can remain elevated for extended periods, and price can continue rising as long as structural cycles remain intact. Traders who sell too soon based on overbought signals alone often miss significant upside.
Momentum indicators like RSI or stochastic can flag extreme conditions, but context is crucial. If the broader trend is bullish and cycles support it, overbought readings often signal strength, not weakness. It means buyers are firmly in control.
This is why cycle analysis is so critical. It helps separate a warning from a continuation. Momentum might be overbought, but if intermediate cycles are still climbing, the trend is likely far from over.
How do you know if a bullish trend is sustainable?
A sustainable bullish trend is supported by alignment across multiple timeframes. If intermediate and long-term cycles are rising and price holds above key support levels, the trend is likely to continue. Sustained volume, higher lows, and orderly pullbacks are other hallmarks of a strong trend.
One of the most reliable signs is the behavior of price around support. If pullbacks are shallow and buyers return quickly, it's a strong signal that the bullish trend is not only intact but likely to persist. Confirming crossovers and cycle stability further reinforce this.
Also, structure should remain consistent. If bullish crossovers stay intact and channels are respected, the market is showing discipline--and that's a key element of sustainability.
Should I sell when prices feel "too high"?
Not necessarily. Feelings aren't reliable indicators. Instead, focus on structure--are the long-term and intermediate trends still up? If yes, a high price might just mean momentum is strong, not that a reversal is imminent. Let structure guide decisions, not sentiment.
Often, prices feel "too high" right before another leg up. This is the emotional discomfort that comes with trending markets. The best traders learn to manage that discomfort rather than act on it. They recognize that price can run much farther than expected.
If you're going to take profits, do it systematically. Trim into strength if that's part of your plan--but avoid selling out of fear when the roadmap still supports continuation.
What are good strategies during a bullish trend?
During a bullish trend, strategies like buying on pullbacks to support, using layered stops, and staying engaged with the trend tend to work best. Avoid chasing price too far from support and instead use consolidations or retests to enter. Structure should always be your compass.
One effective method is to scale into positions at or near key crossovers. That way, you're not guessing tops or bottoms--you're using objective levels to build your position. These areas are defined by technical behavior that repeats over time.
Also, journaling trades during bullish phases can help refine your strategy. Look for patterns in successful trades and use those insights to repeat what works. The key is consistency and discipline.
Resolution to the Problem
The problem most traders face today is overreacting to short-term extremes and misinterpreting them as signs of a top. The result is emotional decisions that lead to poor timing, missed opportunities, and frustration. Without structure, traders are left to rely on hunches and headlines--a dangerous game in volatile markets.
The solution lies in understanding the full picture: short-term cycles may look elevated, but as long as intermediate and long-term structures are rising, the trend remains intact. Pullbacks are opportunities, not exits. Structure, not emotion, should guide your strategy.
Sticking with this discipline requires confidence in your framework. And that confidence comes from practice--reading the cycles, watching the price action at support, and staying engaged with the roadmap. Traders who learn this approach become less reactive and more prepared.
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Conclusion
Don't get shaken out by surface-level extremes. Today's market still shows strength in its foundation. The bullish structure remains intact, and the opportunity lies in staying the course while others get distracted. This is where preparation and discipline make all the difference.
The alignment of short-term, intermediate, and long-term cycles tells a clear story: this isn't a breakdown. It's a continuation. Dips are setups, not signals to exit. When you understand the roadmap, you're less likely to get lost in the noise.
Stay focused, stay disciplined, and above all, stay aligned with structure. The trend is still up--and for the trader who respects it, the rewards can be substantial.
Author, Steve Swanson