The current market is very strong. Sellers have not yet found a price where they wanted to get out while buyers lost interest. But this will not last forever.
I have shown the following chart before and I will show it again. The 1929-1938 market wrote a great script for the Nasdaq Composite (COMPQ) since the March 2000 all time high. After a five year bull market the Dow Jones Industrials market rolled over in 1937 and fell about 50% in one year. The Nasdaq began falling in October 2007 and fell 56% in one and one-half years. The Dow rose 63% from the spring to fall of 1938. The Nasdaq started rising last spring and has moved up 58% off the low. There is nothing in the chart that makes me think that the Nasdaq will diverge from the 1937-38 roadmap provided by the DJIA.
The strength of the current move is impressive. As price approaches a 50% retrace of the 2007-2009 bear market, it has not come close to the 1×1 ascending slope. If the 50% retrace level does not stop this move then the 5/8 level and the 1×4 descending angle off the 2007 high should. A move of 60% plus is not normal with a correction of only 30 days.
So when will the market roll over? Price will move through day 150 of this bull market move on Wednesday. My guess is that the correction will not hold off beyond day 180-182 of the rally.
Once the market does start down, I expect at least a 90 day correction. I have no idea the depth of the correction. If the roadmap from 1938-1942 holds up, the correction will last multiple years and eat up all of the gains from this year. It is possible that the market will churn for a few months before dropping. Or, I could be completely wrong and the market dances onward and upward into next year.
Related Posts
Tags: DJIA-Dow Crash 1929-1942 · Market Cycles · Market Outlook3 Comments
Love you blog! I finanlly found some1 that thinks along the same lines that I do. I ran into your site through my research on W.D. Gann and time cycles.
forsale – glad you find the blog useful.
Note: I noticed that Gannalyst does not create the linear calendar very well. Day 180 is actually on September 5th. It is still a good approximation tool but the longer the timeframe, the more this tool is off from the true cycle.