It's been a while since I've stepped back and taken a look at the big picture of the markets, so I'll take this opportunity to do so. This will be my last post of the day, so I imagine there will be a gazillion comments by the time Springheel's post is up in the morning.
The market has been climbing mercilessly for twenty-two months now, and the surviving bears are, naturally, pretty despondent over the Fed's seemingly unlimited ability to levitate these markets. If you look at the very long-term charts, however, the rise makes sense in context, and there is hope for the bears after all.
The NASDAQ Composite is right near its 38.2% retracement level, which proved to be an important reversal point back during the 2007 top (in spite of a bit of an overshoot). In each of these examples, I've circled the interesting price points of the charts in red.
Looking at the Dow Industrials (which, believe it or don't, I'm still looking to hit under 6,000 before this is all over – – see the pink tinted circle) the retracements also seem to have plenty of power. We have well exceeded the level found last April, but as March 2009 proved, you can have some "overshoots" while, by and large, respecting these support and resistance levels. Take note of the many instances of this happening.
Here's an even longer-term view of the same index.
It's not often that Fibonacci Arcs are useful to me, but there are a few indexes in which they are. The S&P MidCap 400 is one of them. On the left side, you can see the fascinating behavior of the prices are they hug the curve. After the cruel rise of the past two years, this index is at last approaching the same arc.
Probably the most fascinating chart to me of all is the S&P 500, on which I have placed fan lines going back about eighty years. The power of these lines is breathtaking. I've highlighted the 61.8% line in particular (start point: 6/30/1932; end point: 3/24/2000).
Zoom in closer to get an appreciation for where we currently are.
There is no shortage of people, pundits, and publications that have made fools of themselves calling "the" top. I don't want to join that chorus, since an overpriced market can always become even more overpriced. But, for the seven bearish individuals still alive here on Earth, I can say the charts may be a source of solace.
