The Basic View

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Good morning, and a happy weekend to all of you. The Slope Facebook Fan Page has 256 members so far, and I'd like to encourage other Facebook folks to join. Please remember that joining a fan page doesn't expose your information to other members (unless you have your privacy settings set so wide that non-friends can see you anyway!)

As for why I'm doing this – – I'm just experimenting with different forms of Slopers staying in touch. After all, the fan page provides for Discussions, posting of Photos, etc., so you might as well have some fun with it. Don't be shy about contributing to the page if you're already a member. Let's see if it goes anywhere. If it's a dud, it's a dud, and that's OK. Either way, it won't affect the blog.

As for the market, I'll just say one thing, and it's about the S&P: take a look at this monthly graph (a pretty crude granularity for a guy who often uses minute bars!) for the past 10 months:

0613-weakening

I see something interesting. Even though the drop was pretty fierce (with December as the only respite), the climb is consistently losing energy. The range is getting tighter. I am aware of the fact that we're only halfway through June, but looking at a chart like this reminds me of a bouncing ball whose every bounce is smaller than the last.

0613-ball

For me, the most important graph of all is below: this is the daily graph of the S&P 500 index for the past ten years. We see two bear markets: the one from 2002-2002, and the current one.

With the older bear market, at least the market stayed within the bounds of its descending channel. The present bear market is so severe that it broken the bounds of this channel last September, and only now has clawed its way to the underside of it.

0613-longterm

So I think there are a couple of possibilities at this juncture:

  1. The market is very close to climbing as high as it's going to climb, and that lower channel line is going to define its potential for now. A drop from these levels could take us to maybe the low 800s, or;
  2. For reasons I cannot fathom, the market somehow finds the strength and rationale to keep on climbing. The very, very highest I could envision it possibly going would be about 25% higher from here – somewhere between 1150 and 1200.

But I will say this, irrespective of which way we go: I would say the likelihood of the market pushing above 1200 any time before 2011 is approximately zero, and the odds of us cutting below 666 on the S&P before 2011 are better than even.

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