Thursday, March 28, 2013

A Potential Symmetric Rally

March 28, 2013
12:13 P.M. EDT

This market has the potential to top in a manner symmetric in price to the last decline from 2000-2002 and rally from 2002-2007. Assuming the bear market started in 2000 (more on this potential new development in another post), the rally from March 2009 would top at 14,589.26 on the Dow Jones Industrial Average if the rally retraced 1.538 times the previous decline. However, because we are assuming the bear market started in 2000, we are taking the top from the orthodox top in 2000 rather than 2007.  The first expanded flat Primary wave B extended approximately 1.538 times the length of Primary wave A down from 2000-2002. Applying this relationship again in cycle degree (taking the move from the orthodox top at 11,750.28 to the cycle wave a bottom at 6469.95) now would give us a nominal DOW target  of 14,589.26. The reason I decided to post this is because the high as I am writing is 14,585.10. If in fact this relationship were to play out again, the entire rally from 2009 would top right now. I am by no means certain of this relationship, but given the fact that the market has basically met this relationship today, March 28, 2013, I thought I would present this possibility.

Update April 2, 2013 1:18 P.M. EDT:

Applying this same relationship to the S&P 500 Cash index, we arrive at a level of 1579.10. Although we have exceeded the ideal level on the Dow Jones Industrial Average, we will give it a bit of room as we await this uptrend from November 2012 to top. The S&P Cash index is currently trading at 1572.

Friday, March 15, 2013

A Terminal Rally

We have a clear 5 waves up from the November 2012 low.  Therefore, the market is setting up for at least a correction, if not a resumption of the larger bear market. The ending diagonal pattern previously posted has been negated due to the fact that the third wave as labeled was the shortest, which is a rule breaker in Elliott Wave terms. The Elliott Wave count is a bit muddled here, but anyway you look at it, we have corrective waves up from the 2009 low, which imply, even after new-all time highs have been achieved, this is still one large bear market rally, which, when complete, will lead to a decline below the March 2009 lows in a 4-year cycle low. That being said, the divergences currently present are less than ideal for a 4-year cycle top. The rally from November has been quite strong and has managed to trigger a Dow Theory Bullish Primary Trend Change, which, after the previous bearish primary trend change had been in place for 5 months, is quite significant. However, as we saw in the Summer and Fall of 2011, not all Dow Theory Trend Changes are equal. When everybody and their brother were calling for a bear market, we had not gotten the cyclical setup we needed to cap this rally. Tim Wood was literally the only analyst I knew of that specifically called for a move above the May 2011 highs. We must look at the statistics, Elliott Wave picture, and momentum data to determine if a longer term top is likely. Once we get the proper setup in place, and a completed Elliott Wave structure, this market will be set to resume the larger bear market. Although the Elliott Wave picture is unclear on an intermediate-term basis, I believe I may have uncovered the reason why this Grand Supercycle top is taking so long. More on this in a subsequent post. For now, our focus is on this rally from November 2012, which is in its final stages. Additionally, one can clearly see a rising wedge form the February low. This is indicative of a terminal move. Therefore, a top is just around the corner and we will have to examine the nature and extent of this coming move down. If it is corrective, that would suggest a move to new highs after a period of retracement from near these levels. If the move is 5 waves, impulsive, it would suggest a completed uptrend off the 2009 lows and a resumption of the larger bear market.