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A Case for
a Bull Rally
Working backwards to see if there is any possible relationship reveals
that 8 years (the previous value in the series) before the 1990 bottom
was the 1982 bottom, 5 years before that is 1977 the first retest of the
1974 low, 3 years was the 1974 low, 2 years the brings the 1972 top.
Back one year and then one more year brings us back to the 1970 low.
I’ll admit this is a little sketchy and there is a lot of lead way
within the time frames but while these are not all historical turning
points they all produced a major change in trend direction. It’s
just another piece of homework and the one who does the most homework
usually wins.
While this is great conversation and could be the alert
for a major change in direction this longer term perspective is not
precise enough information for trading. For that we need to shorten our
look back period; so, let’s look at some shorter term charts.
We
will start with some cycles. Below is the S&P 500 with 78.25 week
cycles lines.
78.25 WEEK CYCLE
With a Standard Deviation of only 1.53
weeks, the 78.25 week is one of the most reliable cycles in the market.
If March 12 did mark the low for the cycle then we should see (and have
seen) a significant upside rally. Note the pattern in weeks between the
lows. The ’94 – ’95 low to low was 81.57 weeks
followed by the ’95-’96 low to low of 76.43 weeks. The
’00 –’01 low to low was also 81.57 weeks. If March 12
is the ’01-’03 low it has come commenced a week or two early
but at exactly 76.43 weeks low to low showing the market’s amazing
consistency with the ’93 – ’97 moves and a potential
rhythmic pattern. In a perfect world all of these cycles would top and
bottom at the same time; but, rarely does this happen. When they do,
it’s fabulous and time to mortgage the farm. Inside the 78.25 week
cycle the shorter cycles are fighting against each other.
9-MONTH CYCLE
The five day rally's price action has caused the 9-month oscillator to
turn up (red line, top third) this should indicate that the 9-Month
cycle bottomed prematurely, though I am wary of this conclusion. The
cycle is due on 4/ 15/03 and now that the rally has stalled and the
9-week oscillators (blue) appear to have topped out I think it may
provide a retest of the 3/12/03 lows. The lows must hold and the decline
needs lighter volume to add confirmation.
The 9-month low may coincide with victory
in Iraq and with the aforementioned cycles this could produce a rally to write
home about.
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