Bear-Market Rally Parallel Continues
This chart below shows a day-by-day comparison with today’s S&P 500 and the “rising wedge” pattern that ended the bear-market rally in February 2001. To follow along, look at this chart, and then this chart.
The chart above shows the S&P 500’s closing price for 12 days. The blue line is 12 days from 2001, and the red line is 9 days from this year with room for 3 more next week. The 7th day is where the bear-market rallies crack. That was February 2, 2001 and May 7, 2008.
Today’s 9 point drop was a bit worse than the 2 point drop on the 9th day in 2001. So, we are collapsing a bit ahead of schedule. The last few believers in the rally are being wrung out here. If we continue in the same pattern of February 2001, traders will realize that the bear market is not yet over early next week, and a major sell-off will ensue.
May 9th, 2008 at 4:57 pm
Matt, I think you are too early. If you look back in 2000, a double top occurred: the first top about 2000/12/11, the second about 2001/02/04.
Conclusion: a small decline from here to another top in the coming weeks and then… look out below.
May 9th, 2008 at 6:04 pm
Hi W T F,
I don’t think most technicians would call that a double top because the market had been declining prior to the December peak. I would call the December peak a move back up to the top of the downtrend channel, and then the move up to the February peak a retracement that came in the form of a rising wedge. Do you see what I mean?
Matt