We got some price stabilization right at our first support level below, which coincides with the 38% retracement of the current bull market from the March 2009 lows. So what happens next?
Well my model calls for another wave down likely to complete the Domed House pattern of the Three Peaks and a Domed House for you George Lindsay followers out there. I expect prices to continue to rally back into the 1230 - 1270 area over the next couple of weeks or so, with a slight chance of even returning to 1290. From there I expect another drop, the question is how big will the drop be?
Well I believe it will basically match the size in length of our last drop from the May highs to recent lows, that created approximately a 270 pt S+P 500 drop to our support level. Using these numbers going forward I would expect a similar drop to possibly take us below the 1000 level on the S+P depending on where the high is put in.
Again refer to the previous post as the 935 final support level will be key to keeping the bull market structure intact. Hypothetically as long as that level doesn't get violated to the downside, the potential is always there for price stabilization and new bull market highs eventually made maybe as soon as next year.
But as always trade safely and stay well hedged, I can not emphasize this enough!
Tuesday, August 2, 2011
The market has sold off a bit more than expected here by taking out 1270 to the downside on global macro slowdown concerns. A deeper retracement to entice buyers is now expected.
We had a 210 pt drop in 2010 from the April highs of 1220 to the July 2010 lows of 1010. And a subsequent rally of 360 pts proceeded.
A similar drop from the May highs of this year would take us into the 1160 area. We have plenty of confluence in the 1200- 1160 to boot. I expect the market to make it's low around this level.
An estimated 360 pt rally should occur at that point which will take us into 1520 on the SP 500 somewhere during or after the 2012 elections.