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Amateur Investors Weekend Stock Market Analysis (3/27/10)

http://www.amateur-investor.net/Weekend_Market_Analysis_Mar_27_10.htm

The Wave pattern from the March 2009 lows could be a Triple Zig Zag pattern similar to what occurred in the late 1930's. From 1937 through early 1938 the Dow had 5 distinct waves to the downside. This was then followed by a Triple Zig Zag pattern which peaked in late 1938 at the 61.8% Retrace calculated from the early 1937 high to the early 1938 low. Once the peak occurred in late 1938 this was followed by a choppy correction over the next 3 1/2 years before a bottom occurred in early 1942 as the Dow dropped slightly below the early 1938 low.



As you can see a Triple Zig Zag pattern can look awfully similar to a 5 Wave pattern which is likely confusing those who follow Wave Analysis like Prechter for example who a few months back thought the rally had ended with the mid January highs. Meanwhile others are confident another Secular Bull Market has begun because they think the move off the March 2009 lows is a 5 Wave pattern. Right now I favor a Triple Zig Zag pattern as shown below. Of course the question is will the Dow rally back to its 61.8% Retrace just above 11240 before the Z Wave peaks like occurred back in late 1938?



Finally as I showed a few weeks ago each time the Mutual Fund Panic Index has dropped to -20 or below (points A) the Dow has rallied at least 70% from the bottom. Right now the Dow has rallied just over 69% from the March 2009 low. If it rallies up to 11000 that would be a 70% rally from the March 2009 low and if it gets up to the 61.8% Retrace near 11240 that would be a 74% rally.