When one is feeling adrift, as I have been, it can be constructive to take a step back and look at the big picture. I thought I'd use today's post as an opportunity to review some of the general ideas I've put forth about the months ahead.
Nothing has taken place yet to challenge my long-term projection. Early this year, I did a a time analysis of when precisely the top would be, and it yielded the date January 16, 2010. That was a Saturday, so the next trading day – January 19, 2010 – has indeed been the top so far. In fact, the high that day – 1150.45 – was accurate to 99.865% of the target I had laid out fifteen months earlier. So, provided that stop stays intact (for years, actually), I'll remain comfortable with my general outlook.
I did a deeper dive into the whole realm of time analysis back on January 8th, and it suggested a target price of 7,960 on the Dow by July 17, 2010. Let me stop right here and say I think this is outlandish, crazy, and very hard to believe. Such a fall would resemble this:
The above seems crazy to me. I just can't see it happening, except for something extraordinary like a huge terrorist attack or a cataclysmic revelation in the financial markets. But let me temper my prudence by saying this, and I'm going to put it in bold just to be very clear: the one and only reason I cheated myself out of 2009's gains was because I didn't believe the insane course I plotted out could possibly take place. Read that again. Maybe a few times. Because it was the worst trading error of my life, and it haunts me every day.
I did the analysis. It wasn't just right, it was breathtakingly right. And I didn't believe it. So I didn't act. And I am poorer for my own self-doubt.
Does that mean the above is guaranteed to happen? What, are you stupid or somethin'? But I am trying – I am really, really trying – to have a little more faith in my own analysis. Maybe I'm actually decent at this. God knows I'm trying my best.
We can modulate the drama of the above chart by recollecting the 2004 analog, offered up more recently. Both scenarios agree that, in a shorter timeframe (say, within the month of March), another bounce is in store, and as I've said repeatedly here, I am going to make a valiant effort to cover my shorts on just such an occasion, as I missed the identical opportunity back on February 5th.
I'll also say that it makes sense to me that the market has stalled here. There was very little to keep the market from recovering from its huge plunge in 2008, but take a look at the past decade. There is a mountain of overhead supply spanning years. I am highly confident the countertrend rally is over.
So there we have it. My portfolio – and my psyche – are in better shape than they were last weekend, and I'm actually looking forward to March. Let's keep a close eye on the above parallels, as they may be helpful to us. Have a good Saturday.
