Thursday, June 27, 2013
up to 1630-40 then down
Early this week the market dropped to 1560 where the drop from the May high matched the size of the September - November 2012 decline. I think the current rally will eventually carry the market up to the confluence of the rising blue trend line and the highest of the three blue declining trend lines (purple oval). This is the 1635-40 zone and is also about a .618 retracement of the drop from the May high.
I suspect that the rally to 1635-40 have two distinct upward phases of which the first is nearly over. This two phase sort of move is common in corrections against the direction of a bigger trend.
Once the rally to 1635-40 is over the second phase of the drop from the May 2013 top should develop. If it is as big as the initial drop from that high it will carry the index down to 1515 or so where it will meet the rising 200 day moving average. At that juncture I expect to see a lot more bearish sentiment than is now visible as well as obvious bullish divergences in my advancing issues oscillators.
I think the drop from last month's top is just another correction within an ongoing bull market. By the end of the year I think the S&P will have breached the 1700 level. My Lindsay calculations also suggest that a bull market top is due just about then too.