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Dow and S&P Flirting With Pre-Crash Levels


The major indices are hovering near pre-crash levels for 2008. Could the market be topping out?


The big question of course is, as the longer this market stretches higher and shrugs off the normal expectation for a 5% pullback, does it become less resilient, suggesting something more pernicious?

Gold (GLD) is following through from our buy setup on the metals last week, and is flirting with turning up the important Quarterly Swing Chart.

This will occur on trade above the fourth-quarter high since GLD made a swing low at the end of December.

The behavior following this turn up on trade above 175.46 will be important. The normal expectation if GLD is bullish, and the big correction since last summer was simply a bullish correction on the way to new highs, would be for a mild reaction in time and price following a turn up of the quarterly.

Note that this week's upthrust in the metals occurred roughly 180 days from the primary high on August 22. That suggests that the price action in early March will be critical as this will be 180 days from last year's September 6 all-time high.

Note the natural time harmonics of 60 days, 120 days, and 180 days that have been unfolding in GLD:

1. From the September 6 high, the November pivot high occurred roughly 60 days later.

2. From the August 22 high, the low for the move in late December was roughly 120 days later.

So, the first week in March is pivotal for metals and equities as it is the third anniversary of the March 2009 low.

If you think that anniversaries in the market are meaningless, it is worth considering that the May 2011 high occurred near the third anniversary of the May 2008 pre-crash pivot high, and that the kickoff for the current rally occurred near the third anniversary of the November 21, 2008 crash low.

Conclusion. It looks like a correction is starting . The primary target is probably a test/undercut of the 1300 level. I would put the odds that a high for the year is here at about 50/50.

However, I doubt that most money managers will be inclined to dump stocks promiscuously prior to the end of the first quarter and will instead circle the wagons to protect the baby going into the end of March, and the 12th anniversary of the Bubble Top on March 24, 2000.

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No positions in stocks mentioned.

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