But we know the NDX is already over the 2007 peak. The next issue concerns the SPX and what would that take to confirm anything longer than a cyclical bull over the past two years? Perhaps this long term chart can shed some light on that mystery (sse chart below). We have a longer term pitchfork with anchors going back to 2000 which are pointed down and now we are getting really close to. What I’m calling the ‘bear 3rd rail’ hits around 1325. If we take that out the longer term path of least resistance is no longer down. Taking out this pitchfork channel would confirm technically speaking the March 2009 bottom as a long term bottom if the SPX can put this downward sloping channel in the rear view mirror. We are not there yet. There is still an opportunity in the next 30 SPX points for sentiment to turn incredibly bullish. Realistically, if it wanted to, the SPX can get there in a week. That would likely push sentiment towards euphoria. But what if we tread water sideways and drift up into it? If that were to happen sentiment wouldn’t change very much and chances are the pattern would then violate. It all depends on the mood of the crowd when we get there.
Right now, today at the January Martin Luther King Day break I don’t think the market has what it takes to top out but it could be close. Based on this pattern we can also have a serious correction for weeks or months and since we are hundreds of points from the bottom we wouldn’t confirm whether this is a longer term bull or bear market. We’ve gone from 1010 to 1293 in less than seven months. Prices can hit the 3rd rail, turn around and go back to 1000 for the duration of 2011 (which by the way would be a 22% drop) and still not create any real technical damage to the chart.
The initial indication here is for the Greenback to attempt to bounce after its week long losing streak, which means we could see stock market weakness in the early part of the week.
What you should take away from this discussion is the fact the only way we can confirm a longer term bull market overall is if the SPX takes out this long term channel.
Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.