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I believe that the long term bear case remains in excellent shape. That
said, I am beginning to see some signs that give me pause in making shorter
term bearish bets. This does not mean that the short term bullish case is
strong, but rather the short term bearish case appears to have weakened
leaving open the possibility that the next months will see a secondary low
and a higher high. A review of charts at previous panic lows suggests that
the 21Sep low is likely to be retested within 35+- days or not later than
09Nov.
Now for a bit of fun!
The attached weekly SP500 continuous unadjusted futures chart suggests an
intriguing scenario. Technical work performed on the weekly chart months
prior to September 11 suggested a price target of 1041 (call it 1000-1050)
for completion of the initial 5 wave decline. One would expect this to be
followed by a rally ... quite likely an ABC correction of 38%-50% lasting a
minimum of 38% of the time in decline. The events of September 11 set off a
panic decline to 939 which overshot the target quite a bit.
While one typically watches retracements from the real low (left hand
retracement column) it may be worth watching retracements from the typical
(projected 1041) low (right hand column). When retracements are measured
from the typical low, the rally is seen to be much less powerful than when
measured from the real low and there is far more room for an upside
retracement which does not negate the primary bear trend.
Just a bit of out-of-the-box thinking which might just go a bit toward
explaining market behavior for the past several weeks. Thoughts?
Earl
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