Wednesday, August 08, 2012

bull market rhythm

Here is a chart of the daily advance-decline line going back to the start of the current bull market in March of 2009. You can see that the market has shown a very steady rhythm on the way up. Only once, in 2012, did a reaction carry it back as far as its rising 200 day moving average (red line).

So far there have been three corrective phases of note: mid- 2010, mid-2011, and mid-2012. Each corrective phase sent the advance-decline line down about the same amount (blue dash rectangles). Each of these corrections followed  a much bigger up move (green dash rectangles). The move off of the 2009 low which ended in April of 2010 was the biggest of the three. The second and third advancing phases became progressively shorter.

Right now I think the market has begun the fourth advancing phase of this bull market. The last one, from October 2011 through March 2012 carried the advance-decline line up by about 33k (see scale on right side of the chart). The 2010-2011 up phase carried the advance-decline line up by 55k. The 2009-2010 phase carried it up by 95k.

So far the up phase that started from the June 2012 low has carried the advance-decline line up about 15k.If the current rally is as big as the 2011-12 rally in the advance-decline line the market is currently less than half way to its ultimate peak in terms of this indicator. If so I would expect to see the cash S&P above the 1500 level before this up phase in the advance-decline line ends.

1 comment:

DP Johnson said...

IMHO, this is your best work, Carl. I have learned about Symmetry in the markets and it works.