Thursday, November 08, 2012


Here is a daily bar chart of the cash S&P 500 going back to the start of 2012.

Last week the  market rallied to kiss its 50 day moving average (black wavy line) and then dropped to new lows for the move down which began from the September 14 top. As you know I think this market is headed down at least into the 1310-20 zone where the current drop would equal the size of the March-June 2012 drop (blue dash rectangles).

However a drop that low would put the  S&P well under its 200 day moving average (red wavy line). Since the bull market had already lasted 42 months at the September high such a down side penetration of the  200 day moving average has bearish implications. In this situation I would expect the drop to 1310-20 to be followed by a rally which would carry the S&P back to its 200 day and to its 50 day moving averages.But after that rally I would expect the market to continue lower.

A drop as big as the  2011 drop would carry the S&P down to 1170-90. George Lindsay's three peaks and a domed house formation has been a good context within which to interpret the market's action for nearly two years now. The downside target for the  3pdh is the October 2011 low near 1080.

1 comment:

Rob said...

Carl, my guess is you are familiar with the old Bradley indicator, although you probably haven't paid much attention to it in years. I did get addicted to it, still watch it, still have my Bradley data that I bought years ago. It can be stunningly accurate at times, many times not accurate at all. So take it with a grain of salt. But I do think this has a good chance of happening. My data shows the next Bradley date as next week Wednesday, November 14, plus or minus two days, to be followed by a very long interval all the way to December 21, plus or minus two days. I think there is a good chance this will happen. Low next week some day, followed by a long steady climb through December 21. Fits in perfectly with where you're at.

Then we're at the fiscal cliff. Surely they'll get that settled and the market will take off, right? It could happen any day, right? Same thinking as we had at the debt ceiling talks which led traders to stay in on the positive side day after day as we dropped and dropped.