Here is a weekly chart of the S&P 500. I want to use it to illustrate the position of the market using some of the simpler and longer run considerations which make up George Lindsay's stock market timing method. By the way, if you are a Lindsay fan and have not yet purchased a copy of Ed Carlson's new book, do it now!
I had thought that the price action from February to July of 2011, encompassed by points 21-25 on the chart, was the top of the first story of the domed house within Lindsay's Three Peaks and a Domed House formation (the three peaks are points 3, 5, and 7). But instead the May 2, top, labeled as point 23, is now my best guess as the top of the dome and the end of the bull market. The implication of this interpretation is that the market is headed below point 10, the separating decline, which ended at the July 2010 low. This was the 1010 level in the S&P. My point and figure work which I explained last week suggests a downside target of 990 or so.
Lindsay's timing method let's us make an educated guess as to how long the market will take to complete this bear market.
The March 2000 top in the S&P 500 was a very important top. Lindsay generally expected an important low to develop about 12 years plus a few months after such a top. March 2012 is exactly 12 years from the year 2000 top which ended the dot com bubble (green arrow).
One reason for thinking that the May 2 top in 2011 was point 23 is that it was 787 calendar days after the March 6, 2009 bear market low. This qualifies the bull market as a long basic advance according to Lindsay. A long basic decline of 345 days from the May 2 top would end on April 12, 2012, about 12 years and 1 month from the top in March 2000.
There is another consideration which is worth noting. The drop from point 7 to point 10 in the chart above qualifies as a descending middle section in Lindsay's terminology (see chapter 13 of Carlson's book). I put point C of this middle section on the day of the Flash Crash, May 6, 2010. I put point E on June 4, 2010.
Lindsay's theory is that the time from one of points C or E to the subsequent bull market top on May 2, 2011 (point 23 on the chart) should equal the duration of the subsequent bear market. The count from point C gives a bear market duration of 361 days while the count from point E gives a duration of 332 days. The point C count predicts the end of the bear market for April 29, 2012 while the point E count predicts the end for March 31, 2012. Either of these time spans qualifies as a long basic decline according to Lindsay.
So my best guess right now is that the 2011-2012 bear market will end in April 2012.