10-12-11 Comments

[Mike]

I went back and looked at the following bear markets:
1969-1970,
1973-1974,
1981-1982,
2000-2003,
2007-2009.
The attached pdf file at the bottom of this pose shows charts of each period.

The one theme that is constant in all of these past markets is that there was an initial wave down followed by a bear market flag structure that rallied to the 200 day moving average before rolling over into wave 2 down. In one case the bear flag is more of a sideways consolidation (73-74).

The current market would need to rally 4% (NASDAQ) 6.7% (S&P) to get there or wait a long time for the 200-day to come down.

We might not be ready for a rally to the 200-day today but it would be consistent that we would do this say before year end as part of the normal bullish seasonality of October through December. If we did this we would complete a final large head and shoulders structure using 2010 flash crash as left shoulder. There is a smaller head and shoulders pattern that is obvious and contained within 2011. The larger H&S pattern gives a price target of 737 on the S&P. The last chart in the pdf file shows my artistic view of this possibility.

I am reminded that the market is going to do what ever it will regardless of my opinion. This view is what I would call my middle road scenario going forward.

Bear Market.pdf

[Rembert]

Thanks Mike, that's a very nice PDF you have put together.

[adam ali]

Mike, we're still on FTD watch, correct?

[Mike]

Mike, we're still on FTD watch, correct?

Adam, we are watching for a FTD. We are on rally day-7 count. Depending on what happens at the close we could see a FTD but so far it looks like it could happen.

I fear it is a junk off the bottom rally however. Leading stocks are not acting well. Lagging stocks are up the most. I am long DLTR which seems stalled at the moment. Leading stock bases are not well formed.

[mnoel]

Thanks Mike! Very interesting!

[asomani]

Yes, Mike, your thoughts are always appreciated. That is an excellent observation you made about the first major rally in a bear tending to go to the 200-day moving average, and the supporting charts were helpful.

[Adriano]

I also join the group to say thank you Mike, very interesting.

I've found this list of bottoms:
http://fivetrades.blogspot.com/2011/...ly-charts.html

[Riskslayer]

Hi Mike,

I guess it could all be just an orderly pull-back after a big powerful leap yesterday, but ...

$COMPQ got up to 200 dma yesterday (10/24), and now ... I have been meaning to print this post off and study it in more detail.. Looks like today is the today for that.

Thanks for all your good work here,

Shawn

PS: Paul Duncan and I ran into Townsend Baldwin at Minervini's event a couple of weekends ago. Townsend spoke highly of you, as we all do!