Wednesday, August 22, 2012

S&P update

Here is a weekly bar chart showing the cash S&P 500 going back to the 2007 high at 1576.

As far as I can tell the bull market  which began from the March 2009 low point at 666 is still underway although it is a bit long in the tooth at 41 months and counting. Most bull markets last between 22 and 32 months. That said, it is worth remembering that the 2002-2007 bull market lasted 60 months and, like the current bull market, the 2002-2007 bull market followed a bear market which dropped this average more than 50%.

As you know I have been tracking the evolution of an example of Lindsay's three peaks and a domed house formation. In this post I suggested that the peak of the domed house might be expected in early October of 2012. The upper green trend line drawn through the May 2011 and March 2012 tops suggests that the domed house top will occur somewhere in the 1450-1500 range.

Of course this market may be stronger than even I think it is. If so the three peaks and domed house formation will turn out to be a mirage. In that case the market is headed for its 2000 and 2007 tops at 1553 and 1576 respectively. In fact it might even take a peek above 1600. This is suggested by the purple trend line and by the fact that a rally from the June 2012 low which matches the size of the rallies from the 2010 and 2011 lows would carry the market up about 350 points (blue dash rectangles) to 1620 or so.

I think a top that high would probably develop in the first quarter of 2013. That is 15 years 3 months from the October  1998 low which ended a quick, 20% drop following the collapse of Long Term Capital Management. This 15 year time period is one of Lindsay's methods for timing bull market tops.

If the three peaks and domed house is going to work out as projected then we should soon witness the development of a top which resembles the classic head-and-shoulders top. The steeper green trend line connects the October 2011 and June 2012 lows. A break bellow that line will probably mean that point 23, the peak of the domed house, has occurred.

1 comment:

Graph1159 said...

Hi Carl,
Have you seen any historical correlation between stock market action around the time of a presidential election and the election results when one of the candidates is an incumbent president?