So can the 2004 scenario be thrown out the window? I'm arguing not yet. Why? Let's look at the move in relative terms.
The retrace in 2004 was 20.32% of the SPX move from the March lows to early 2004 highs. The subsequent retrace upward was 83.36% of the move down.
What do we have now?
Currently, SPX retraced 21.91% of the move from the March 2009 lows to recent highs. We should expect today's retraces up/down to be slightly larger than the moves in 2003/2004. Market moves today seem a bit magnified compared to 2003/2004.
So, the recent retrace down (21.91%) was 1.08 times the retrace down of 2003/2004 (20.32%). Let's assume the subsequent retrace upwards should also be 1.08 times the retrace up of 2003/2004. We get the following interesting results:
If we make a new high next week, then this 2004 analogy can be discarded, but since the sentiment out there is extremely bullish, I took a small short position at the close on Friday.
