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The Pattern Repeats: Is It Really This Simple for Bulls?


The similarities between the current pattern and the corrections of 2011 and 2012 are hard to ignore.

Last update noted that the market had likely found a bottom at 1451, and that new highs were expected directly. The market has obliged and now kicked out some key intermediate levels to the upside, suggesting the rally will continue. There's really not much to add to the bullish expectations and projections of the last couple weeks' worth of updates, and the market is still performing in line with my preferred bullish wave counts. The market also still appears likely to reach November 2012's intermediate target of 1490 +/-.

There's still nothing in the charts that's screaming "sell!" When looking at a long-term chart of the S&P 500 (INDEXSP:.INX), we can see obvious similarities between the current pattern and the last two rallies. While the market always reserves the right to create confusion or to have a pattern fail, the present pattern is quite bullish, and a trip into the mid-to-high 1500s would be an entirely reasonable result.

Click to enlarge

Zooming in a bit on the above chart, one can see the similarities between the current wave and the intermediate bottom which formed in November/December 2011. The resultant rally defied gravity, and ran right through a number of reliable "topping" signals. The present rally has similar potential; the difference is that the present rally falls in the third-wave position at higher degree, and that suggests it should actually be faster and stronger than the previous wave.

Click to enlarge
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