Editor's Note: The following is an excerpt from the Bull Market Timer Weekend Update (click to subscribe). It's being shared here for the benefit of the Minyanville community.


There’s been talk lately about how the recent rally has been reminiscent of the rally after the 1929 crash. We’ve weighed in on this issue in our earlier updates, but let’s look at it through a different looking glass.

1. The 1930 rally was the first significant rally of the bear market, and the current rally is fifth ascent after the decline began.


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2. In 1930, the index hadn’t taken out its 200-day moving average. As a matter of fact -- as we saw in the Bull Market Timer video -- using that metric, market participants would have been saved from the agony of chasing bear market rallies that subsequently gave way to new lows. The Golden Cross (a 50-day moving average crossing above the 200-day moving average) also didn’t occur in the 1930 rally, but both of those have occurred in this rally.


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Here’s the present picture:


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So, in my humble opinion, this doesn’t seem like 1930 based on history.

However, since the media’s favorite parallel has been the 1929-30 timeframe, how about an often overlooked metric for comparison -- the time it can take to reach new highs?

It took the markets 25 years to reach a new high after the market decline that started in 1929. The market didn’t make new highs until 1954. Similarly, after 1966, no meaningful highs were achieved for another 16 years. I’ve previously talked about the weakening bias toward “buy and hold” as a whole generation of investors becomes more wary of the markets.

Many market participants who have lost substantial wealth (the S&P 500 still remains about 33% below the 2007 highs) might not trust the market again after enduring two of the most severe bear markets in the recent stock market history -- both within a decade.

Baby boomers and other disappointed investors are likely to park some of their assets in “safe” areas because the focus has subtly shifted from making money to holding on to their money.

It doesn’t mean that markets will be closed for action, but it does mean that the markets might be choppy and real healing might take some time. To be successful, the market participants will have to adjust to this new reality over time.

Intermediate and Short-Term Trend:

As we mentioned last week, our short-term indicators were starting to cycle into overbought territory again, signaling increasing risk of a correction. We had a 3% correction this week, which has turned the short-term trend of the market down. The intermediate-term trend of the market remains up.

The intermediate trend of the market remains an important mechanism to tune exposure to the market and manage risk -- in conjunction with other shorter-term indicators -- as we have repeatedly discussed over the months. As we have been observing for months, the intermediate trend continues to point higher.

Let’s revisit some support levels on the S&P 500 as this correction plays out: As shown below, the market is already close to minor support in the 1035 vicinity.


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The next significant level will be the 1015 level which is also at the 50-day simple moving average.


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More significant S&P 500 support levels come into play between 950 and 970, followed by 850 to 870, which is the line in the sand for the current market advance.