Friday, May 7, 2010

Following the ’03-’07 Template?

History says we should test the lows at some point in the next few weeks. The fact that we ended well off the lows does muddy the picture at bit, as most "crash" days have ended at or close to the lows of the day. So perhaps this time will be different.

I'm going to point to an interesting parallel that I've been watching.


I've noted that the first and second leg of this bull roughly followed the same pattern as the 03-07 market. The correction following the second leg copied the 04 correction if not in duration in magnitude.

I've speculated that this bull would bypass the middle phase of a "normal" bull and move straight into the final phase.

In 06 the final phase began with a 7 month runaway move. We certainly saw a runaway move out of the February 5th bottom. I must admit I thought it would last a bit longer than 2 1/2 months but I guess we shouldn't be surprised as everything has been unfolding much faster during this bull.

In 07 the runaway move ended with the mini-crash in February. Yesterday certainly qualifies as a mini-crash. So we are still following the 03-07 template. If the pattern holds then we should expect a recovery soon and a final surge higher into an ending blow off top.

From there we should roll over into the next leg down in the secular bear market.

Not that I want to buy into a secular bear market, but sometime in the next couple of weeks we should get a intermediate buying opportunity...unless this time is different and we just continue higher from here.

12 comments:

  1. if my memory is correct, the '07 mini crash was also due to program trading.

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  2. Hello Toby,
    Nice work!
    I am allowed to resume your studies on my site
    Thank you to you

    en francais:
    Bonjour Toby,
    Beau travail !
    Je me suis permis de reprendre votre étude sur mon site
    Merci à vous

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  3. It's starting to look like it might be an "A" wave for gold as of 23:00 May 9. What do you think?

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  4. The Euro is soaring tonight so understandably there is less demand in Europe tonight. A little $10 dip in gold hardly confirms an A-wave.

    Plus gold is now in the timing band for a daily cycle low. We need to see where gold goes to after bouncing out of that low.

    Bottom line we won't have any clue where gold is for at least a couple of weeks...unless it breaks to new highs this week.

    In that case we are almost surely still in a C-wave.

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  5. Toby,

    Big, Big day today.

    I did not see any selling on strength for the SPY today. Do you think this means we are ready to move into that final blow off leg.

    And if so, do you see it unfolding as some big moves early, followed by a more subdued pace then into the final blow off top?

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  6. I don't know my damn crystal ball is broken again :)

    I guess we'll just have to watch as it unfolds.

    I'm just going to sit tight with my miners.

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  7. What do you think about the lack of sos?

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  8. I certainly wouldn't even contemplate shorting without it. (not that I would waste my time trying to short this market)

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  9. Toby,

    Gold printed a new high -- does this validate C Wave continuation?

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  10. Toby,

    Great posts as usual...

    I agree gold looks great, no question there.

    On the equity side:

    I was looking for a similar move in equities to the one you are looking for but the technical damage coupled with the chart patterns have muddied my view.

    What are your thoughts on the fact that commodities are so weak in here outside of precious metals?

    Back in 07 commodities really led the last leg of the equities rally. That still may happen, but as of now the CRB index looks awful. Until commodities climb on board I'm a little suspect of equities...which why I am asking you how you think commodities fit into the equities equation.

    Also, the other panics like this that I have seen in the past have retested or continued lower. Here are the dates of some of them:

    10/19/87
    10/13/89
    8/31/98
    4/4/00
    9/29/08

    Thoughts?

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  11. Yes we should retest the lows. Although I certainly wouln't bet on it with the EU ready to print a trillion dollars and throw it at the markets.

    We are truly in historic times and efforts to stop the bear have gone beyond anything we've ever seen before. So we can probably just throw history out the window.

    As to technicals you can probably throw those out the window too as they are useless in this kind of envirnoment.

    The CRB is mostly oil so it will follow where oil leads. Oil is following the stock market under the assumption that a rising market is discounting robust economic times ahead.

    Personally I think that's hogwash. All the markets are discounting is a whole bunch of money looking for a place to land.

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