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Sunday, May 22, 2011 12:05:18 PM
Amateur Investors Weekend Stock Market Analysis (5/21/11)
http://www.amateur-investor.net/Weekend_Market_Analysis_May_21_11.htm
The chart below is one that should be saved for future generations as it shows the worst two Secular Bear Markets were triggered when the Dow over a 20 day period had 90% of the trading days with a positive gain. The only two signals since 1896 occurred in the Summer of 2007 and back in the Summer of 1929 when the 90% level was reached. From late 2007 through early 2009 the Dow lost just over 54% of its value while from late 1929 through mid 1932 the Dow lost 89% of its value. Meanwhile both were followed by spectacular oversold rallies as well.
Meanwhile if we take a closer look at the period from the late 1920's through the 1930's the Dow exhibited a truncated 5th Wave to complete a 5 Wave move down from the late 1929 high. This was then followed by an impressive "abc" type oversold rally that peaked in early 1937. Meanwhile after peaking in early 1937 the Dow then went through a 6 year correction in which it developed an "abc" type Flat which looks like a Double Bottom pattern. Notice it tested its 61.8% Retracement Level twice from 1937 through 1942 with the first retest being a 50% drop while the 2nd retest was a 42% drop. Thus one could argue the entire move from late 1929 through 1942 was one large "ABC" type corrective pattern.
Now if we look at the current pattern in the Dow it's possible a similar Wave pattern could be developing as "B" would be nearing completion . This would then be followed by "C" which would exhibit an "abc" type Flat (Double Bottom) with long term support coming in at the 61.8% Retrace near the 9000 level. Furthermore a drop back to the 9000 level would be a 30% correction. If this pattern were to develop the Dow would never come close to retesting the March 2009 low.
http://www.amateur-investor.net/Weekend_Market_Analysis_May_21_11.htm
The chart below is one that should be saved for future generations as it shows the worst two Secular Bear Markets were triggered when the Dow over a 20 day period had 90% of the trading days with a positive gain. The only two signals since 1896 occurred in the Summer of 2007 and back in the Summer of 1929 when the 90% level was reached. From late 2007 through early 2009 the Dow lost just over 54% of its value while from late 1929 through mid 1932 the Dow lost 89% of its value. Meanwhile both were followed by spectacular oversold rallies as well.
Meanwhile if we take a closer look at the period from the late 1920's through the 1930's the Dow exhibited a truncated 5th Wave to complete a 5 Wave move down from the late 1929 high. This was then followed by an impressive "abc" type oversold rally that peaked in early 1937. Meanwhile after peaking in early 1937 the Dow then went through a 6 year correction in which it developed an "abc" type Flat which looks like a Double Bottom pattern. Notice it tested its 61.8% Retracement Level twice from 1937 through 1942 with the first retest being a 50% drop while the 2nd retest was a 42% drop. Thus one could argue the entire move from late 1929 through 1942 was one large "ABC" type corrective pattern.
Now if we look at the current pattern in the Dow it's possible a similar Wave pattern could be developing as "B" would be nearing completion . This would then be followed by "C" which would exhibit an "abc" type Flat (Double Bottom) with long term support coming in at the 61.8% Retrace near the 9000 level. Furthermore a drop back to the 9000 level would be a 30% correction. If this pattern were to develop the Dow would never come close to retesting the March 2009 low.
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