Rally Into Summer?
But whether this is the mother of all bottoms remains to be seen.
My baby says she's trav'ling on the one after 909
I said move over honey I'm traveling on that line
I said move over once, move over twice
Come on baby don't be cold as ice
-One After 909 (The Beatles)
Do not wait for the last judgment. It takes place every day.
The range from the October 2007 high of 1576 to last Monday's low of 667 is a range of 909 points.
The decline so far from that 2007 high has been a sharper trajectory than was the 16 to 17 months following the September high in 1929. This has been the sharpest decline without a 50% or so retrace. Note that after an approximate 50% crash in 1929, the DJIA rallied for a 50% retracement of the range, which coincided with a near 50% rally off the low.
Perhaps the reason we haven't yet seen a 50% retracement is because the crash off the October 2007 high was more of a slow-motion train wreck: It took 13 months to get to the November 2008 spike low, and was still scoring new lows just last Monday. In contrast, the initial crash low off the September 3 top in 1929 occurred less than 3 months later on November 13, 1929. In other words, there was literally a dead-cat bounce after November 1929 into April 1930 as the market was thrown off the roof.
So the question is whether the market is poised for a 50% or so advance from the 667 low last week. 50% of the 909 point S&P decline works out to 1121. Got symmetry? Note how 1121 was the level of the breakout in September/October 2004. That was the "eye of the tiger." It was to be a 3-year march to a date with destiny.
Interestingly, the low monthly close of that mid-point consolidation was July 2004 - which of course was 3 years prior to the first top in July 2007. Three cycles of 360 degrees in time.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter