Below is a chart of a section of 2006-2007. The patterns are very
similar to the ones observed over the last couple of months. A line
points to where we currently are.
Based on this and and recent price behavior (distribution), the path projection is outlined in
the chart below. It is in orange for clarity’s sake. The white lines
are all based on channels.
The chart above projects: 1) a down trend for the first week of March
2) a bounce at 1076, when SPX closes a gap 3) a bottom around 1060-1068,
based on prices hitting an ascending trend line and 4) the sell off
will be over by payroll Friday at the latest, a common trend reversal
day.
At the end of this move, I expect the ISEE index and equity
put/call ratios to be at extremes that mark turning points. I also
expect a very strong rally, parallel to the 2006-2007 one, following this sell off. See earlier
posts in my blog for evidence supporting the thesis of a strong rally.
Have a good March, everyone!
