Back in July, I blogged about the 2011 v 2007 pattern being off by a few days. It struck me then that as the 2011 market approached the edge of the cliff, it slowed relative to 2008.
Perhaps some of the forces propping up the market were aware of the analog and threw more ammunition into preventing a repeat [see: Happy New Year and All Aboard.] They only delayed the inevitable, as the market fell 57 days after the top versus 2007’s 52 days.
Interestingly, the market caught up to where it “should have been.” The 2007/8 market bottomed 70 trading days after its 10/11/07 top. After its plunge, this market found a new bottom at 69 trading days after its May 2 top.
The chart below details day-by-day comparisons between the two markets.
|updated to EOD|
Yesterday’s low of 1074 could be interpreted as the equivalent of 3/17/08. It is the 108th day since the top and 23rd since the 8/31/1 midpoint; that would correlate nicely with the counts of 107/22 for 3/17/08.
But, I think it’s more likely that we’re simply seeing the same pre-plunge analog fart that we saw back in July, and before that in June. If so, we’re at the equivalent of 3/12/08 and Minor 1 isn’t quite over.
I’m looking for a decline to 1040 sometime around next Friday, which is at the confluence of a number of harmonic patterns, head & shoulder patterns, trend lines and fan lines [see: The Path to 350.]
Also, a word to the wise: I’m usually early, and I often underestimate the degree of the declines I forecast.
I had a wonderful lunch with some very close friends the other day. They’re both off-the-charts smart. He’s a CFA, former actuary, institutional asset management whiz. She’s an artist turned entrepreneur turned asset management whiz.
Yet, their jaws dropped when I ran my forecast of the S&P; 500 dropping to 350 past them. When I mentioned that 350 would be the first wave down of five in P, I caught them checking their watches, LOL. I know it sounds preposterous. Such a decline no doubt means a Depression.
When I first started talking about another Depression many months ago, most people thought I was ready for an I-love-myself jacket. Now, I’m hearing it talked about daily in the mainstream press (another reason we’re going to bounce up very soon.)
As my friend reminded me, many US stocks derive plenty of earnings from overseas, and are well-positioned to take advantage of still-strong BRIC economies. That’s the key question, isn’t it? It’s pretty clear the US consumer isn’t going to buy as many Cokes and iPhones as in the past. But, maybe the Chinese and Brazilians will.
Will that be enough to prop up multinational earnings? And, what about interest rates? Can we count on 0% bills and 2% notes, or will we see higher interest rates competing for equity investment dollars? What would that do for PE ratios? And, what would it do for global liquidity and wealth?
Lots to think about.