Now that we've officially hit the highs, I figure it's a good time to
review the personal study I brought forth on July 5th. Two months
later, it has played out exactly to plan.
In summary, studying back to 2004, with four instances, it indicated
75% odds that there would be a 50-62% retracement followed by a run to
the highs. As of today, with another successful follow through, that is now 80% odds. Now, it's worth a look back
because each of the successful high retests (2 out of 3) hit previous highs and then had a pullback
of a few percent before heading higher.
In Oct 2007, SPX reversed down to its 50MA for 5.4% which was not followed by new highs because that happened to be THE 2007 top (I do not think this will be the case for us yet).
In Nov 2010, SPX reversed down to its 50MA
for 4.5% with the entire move done over 1wk which was followed by two weeks of basing before resuming the uptrend.
In March 2012, SPX reversed for 3% in 3
days with no 50MA hit followed by marginal new highs which
were major intermediate highs.
This would indicate that SPX is headed back to 1370 in a quick fashion before being followed with new highs which will likely be part of an intermediate topping
process. 1370 seems kinda far, but actually, it's 4.2% which is in
line with the rest of the study. I can't rule it out and I have to
admit, it would be healthy to get a little more fear and volatility
into this market. Be nimble out there.