May 22nd, 2010: The Big Picture
Posted by pugsma on May 22, 2010
9:17am EST (May 23rd): I’ve added my alterantate version (in red) of the bear P3 count where the SP-500 would make a new low under 666, to about 500 then bounce to about 900 in P4 and finally complete P5 at about 400. This would end cycle wave {C} of super cycle IV and a new secular bull market would begin. This a falling wedge pattern for {C} and would limit the depth of the overall drop. In no way do I believe prices will reach the SP-500 sub-50 target and DOW-30 sub-400 target that EWI and Prechter theorize is coming. My primary count is the new secular bull shown in green, but the large triangle (purple) and falling wedge (red) alternate counts are possible outcomes.
SP-500 Monthy Chart (Updated 5-23-10):
12:10am EST: Here are two big picture charts on the SP-500; first the weekly and then monthly. If we look at the weekly SP-500 chart we can see how important this 1050 to 1080 area is for maintaining the bullish momentum. There is long term support in this band going all the way back into 2001 and 2002. And in the summer or 2004 the 1061 level contained the first significant pull-back during the 2002 to 2007 cyclical bull run. The 50-week SMA sits at 1072 and it another important level for maintaining the bull rally. So if the bulls can hold the 1050 level over the next few weeks, it could set-up the next run higher. Failure hold the 1050 support, will lead to a fall to the 1000 to 1020 area and quite possibily the 950 area.
On the monthly chart, you can see that the 50-month SMA sits at 1045. Again another indicator of how key the 1045 area of support is to maintain the bull rally. Another interesting item on the monthly chart is that the 200-month SMA capped the current P1 rally at 1220. Notice how in the spring of 2004, the same 200-month SMA capped the first leg up of the 2002 to 2007 cylical bull rally. But it produced only a shallow retrace and the next more powerful leg of the bull rally began in the summer of 2004 that carry prices to new highs in Oct 2007. I think history is about to repeat in this regard; in that P2 will find support in this 1050 to 950 band and set the stage for a even more explosive bull rally. On this monthly chart you can see my longer term view on where the SP-500 prices may be headed for 2012 and beyond.
One last comment, notice what followed the Oct 1987 (36%) and July 1998 (22%) very rapid (1 to 2 month) corrections during the last secular bull market. The current correction is at 13.4% (1220 to 1056). And even if the1050 area support is broken and the SP-500 falls to 1010 (38% retrace), 943 (50% retrace) or 867 (62% retrace) then the corrections would be 17.2%, 22.7%, 28.2% and respectively. So all of those retrace targets and rapid corrections can be within the context of a secular bull market.
SP-500 Weekly Chart (EOD 5-21-10):
SP-500 Monthly Chart (EOD, 5-12-10):
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