Thursday, March 14, 2013

Market Update... Swing high is near, 15-20% drop to follow.

The above chart is the daily chart of the S+P 500 going all the way back to October 2011 lows. I've highlighted two separate rectangles in green which represent the last 2 bull market campaigns that proceeded off that swing low, including the current one we are still in the final stages of.

As you know from my previous post I am anticipating an approximate 18% drop in the broader market but am sticking with a range of 15-20% for simplicity purposes. The question was from where will this drop take place.

I believe in studying this current bull market cycle we can conclude a swing high forming in the 1607-1614 range on the S+P 500, which I have highlighted in grey. The only other area to watch of course is the obvious 2007 bull market high which is fast approaching, at 1576.09.

So from this range we should expect the correction to begin, using these estimations above an 18% drop in stocks would yield around 1320 on the S+P, which would take out the November 2012 low. This of course is just an early estimation, once the actual swing high is in place we can get a much more definite downside target.

Now this is a bit premature, but once this correction concludes I am anticipating another strong bull market rally that should take the Dow Jones Industrial Average to AT LEAST 16,000 and that is being conservative.