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A Case for
a Bull Rally
One of the main objectives of "technical analysis" is to
remove emotion from the investment equation. This especially helps at
major turning points when the fundamentals like earning, have yet to
reveal the change in trends. The market anticipates everything and
"technical analysis" can help anticipate the market. Often
times when things seem at their darkest there is a hint of light on the
horizon. "Technical Analyisis indicates we may now, be at one of
these junctures.
Long term readers know of my work in recurring market
cycles. Market cycles are not perfect and tend to expand and contract
around an average. Never the less, market cycles are the most reliable
prediction tool I use to estimate potential market lows in advance. When
cycle prediction combines with divergent technical analysis, we are most
often privy to a glimpse of the future.
On a long term basis, I mean
really long-term, we have the 54 year cycle. There is evidence that this
cycle bottomed in 1842, 1896, and last in 1949. Adding 54 years to this
cycle, we get 2003. Remember that cycles expand and contract. Although
2003 is the target year, plus or minus two years is still in the optimum
window. Cutting the 54 year cycle down by more than half, we have the
20-year cycle that started the roaring twenties in ’22, then the
WWII low in ’42. The start of the “Go Go” years in
’62, and take off of our most recent bull in ’82. After
October low of ’02, I wrote that the 20-year and 4-year cycle lows
may be in; but for proof, we would need to see the next 19- week low,
due in March, come in at equal or higher levels. For the major indexes
like the Dow, S&P 500, OTC, NYSE and most importantly the Value Line
Geometric it came in higher. This means the October 10 low could indeed
be the right on schedule for the 20-year and 4-year cycle lows and the
March 12 low could be the retest making a viable 54-year low. We will
now have to exceed the August highs to confirm March 12 as the low.
While this is not very useful in the short term it is imperative for the
long term.
Also Fibonacci analysis offers a different perspective and
some collaboration of the significance of this potential turning point.
If the March low proves to be the retest from which prices can produce a
significant rally it would arrive approximately 13 years from the 1990
bear market bottom. Is this of any significance? The number 13 is a
number of the Fibonacci series.
Fibonacci short course: The Fibonacci
series is created by starting with 0 and 1 and adding the numbers
together to produce the next number in the series, then adding the new
sum to it closest predecessor to arrive at the next value in the series.
(0+1=1, 1+1=2, 1+2=3, 2+3=5, 3+5=8, 5+8=13 to infinity). The magic in
the series is that as the numbers get larger, the ratio between the
numbers approaches 1.618033 which is known as the Golden Ratio, or Phi.
Phi helped build the pyramids at Giza as well as the Parthenon in Greece
and is one of, if not the most prevalent ratios in the market.
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