Thursday, August 18, 2011

Lindsay update

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.


pej said...

Nice one, thanks for the update Carl!

Adsense said...

Hi carl
Thank you for mentioning the mid section count. i have come to a similar conclusion with the timing methods ( mid section & 12 yr count )bull and bear market time spans included . agree completely.
The 3 peaks domed house though i dont agree with your labeling at all. as you noted previously there was no points 15-20 which still leaves the count open to interpretation . if your right then the tryday method calls for a low near 8000 on the dow . if the labeling is not correct then this is one long move to point 10 on the downside in a larger 3 peaks domed house pattern
what this implies is we are now somewhere near the low of point 8
with a point 9 move upwards followed by a point 10 . either way i do think the trend is for lower prices so the count can be deciced later , that said i want to go into it a bit more .
a point 10 decline of longer duration would also call for a longer duration with points 10 11 12 13 14 . using the dow high in jan 2000 and looking at 12 yrs 3 months is april 2012 using the spx and nasdaq march 2000 top and 12 yrs 8 months gives you nov 2012
which surrounds the elections .
using the nya in sept 2000 top using 12 3yrs 3 months you get
nov dec 2012 . all of these lows should correspond with lows .probably higher lows yet should be helpful is all im noting .April to june 2012 is where most of what im looking at points to a low of importance through many methods .i got ed carlsons book and have been reading it and ill say i did learn a few things from it even after studiing the "the selected articles of the late george lindsay "

hotfire said...

Carl, sadly the domed house has changed many times and usually after the fact.

I rather you stick to medium term analysis.

The domed house theory has been a waste of time and now you are trying to make that theory fit somehow.

Michael said...

5-waves down from the 1370 SPX high targets 1096, given that the first leg down was 112 points.

Subtracting 112 from yesterday's Wave IV high at 1208 ( which was a tad more than the .382% fib retracement ) targets 1096.

Concidentally, the 1101 LOW was a 38.2% retracement of the entire rally off the March 2009 low at 666.

Bernanke speaks from Jackson Hole next week on the 26th. I wouldn't be surprised if he lowers the interest rate paid on banking reserves to ZERO.

Stay tuned!

Adsense said...

Hi Carl
thanks again for the mid section count . i have only been working with mid section counts for a couple years so i dont have the time of experiance that you do with them . so im just going to respectfully ( highly respectfully )question your mid section count .i do understand that you do not use a mid section count to calculate a bull market top , it is used to calculate a bear market bottom , your count does agree with me time wise for a low yet what i have noticed with these mid section counts is there tends to be uniformity with in them and generally i have found that the time from E to H is equal to the time from H to J i do not see any uniformity in your count .
also point E is to be placed the high minus 2 june 3rd 2010 was a high not june 4 yet if i use june 3then F is june 21 and g aug 9 2010
weather i use point \C by your labeling or point E from your labeling i have a hard time seeing the time correlating with a high of importance also when using your labeling E F G does not have K L M with in it to poing A which would be aug 27 in order to give this some uniformity i focused first on the monthly charts and then the daily charts . thids may all be a mute point yet ill note it for now . oct 19 2009 point B
oct 23 2009 point D dec 14 2009 point E dec 29 2009 point F
jan 19 2010 point G .feb 5 2010 Point if E to H = h to J
then we should have seen a high on march 30 2010 . it was a high yet the market extneded further . leaves a potential point E on nov 17 2009 .since either point E or point C can be used to mark a low following point J i keep the dec 14 2009 labeling . E to J dec 14 2009 to april 26 2010 using trading days since that is simlpe for this note was 90 trade days , adding 90 trade days takes us to sept 1 2010 the day the market turn up . the closing low was aug 26th and a higher low close was aug 30 31 . so it was a close call yet a day or 2 late yet some uniformity to it starting with point E on dec 14 2009 and using the actual print low on aug 20 2010 there was a total of 177 trading days from point E to A adding 177 trading days a moving forward begining aug 27 2010 you get a date of may 11 2011 , the secondary high was may 10 2011 so again i see uniformity .
Dec 14 2009 to may 2 2011 is 504 calendar days which is outside the range of bear market time spans yet adding 504 days to may 2 2011
you come up with sept 17th 2012
that said if we called the move a sideways movement and counted forward from july 21 2011 to sept 17 2012 we come up with 424 calendar days which implies a long basic decline similar in duration to the 2000 2003 decline as well as the 2007 too09 decline which lasted 429 and 439 calander days .
how many long declines in a row historically has happend i dont know yet it is worth considering
counting a basic decline from a right shoulder fits with lindsays rules . all of this still fits with in lindsay's long term count of 12 yrs 3 months to 12 yrs 8 months from a major peak to a major low . the mid section counts noted have uniformity is and that is why i went into detail . the try day method would call for a low near 8000 using other methods
i come up with 8800 so 8800-7900 is the range and april to nov 2012 is the date range , narrowing that down april june 2012 followed by sept dec . the entire range being april to november which we can then come up with the potential longer term time spans for a new bull market or much larger 3 peaks domed house pattern of several years which i dont even dare touch at this junture . bottom line 8800-8000 is my line in the sand for the larger multi decade bull market . benner bussines cycle had its high due in the year 2010 and its low due this year 2011 , i have noted though looking voer the past 98 years of history that a low in 2012 ( 1 yr off ) fits
this also fits the decinal pattern
way to many correlations for a low next year .
thanks carl and sorry for the rant
yet had to point this out .

Graph1159 said...

Hey there Carl,

I agree with you that the market is likely headed for the July 2010 lows. However, I suspect that we will get there much sooner than April 2012 given how there has been such a rush to panic and volatility so soon after the top. I think that the low of this cyclical bear market will probably be hit sometime in November.