Tuesday, July 28, 2009

A closer look at the evil count ; )

My evil count, which should hurt bears and bulls, is the darkgreen one:

Last Friday, when I was reading the new post on Slope of Hope, I suddenly realized that the pattern from the stock market crash in 1929 corresponds exactly with the current bear market (and its rally).

The bear market rally after the stock market crash in 1929: (Thanks again Tim, that I can use your charts ; ))

The current rally (weekly):

I find this correlation amazing! In 1929 we got a very sharp rally towards the 38% retracement level. After that was reached early December the market turned south again till Christmas before it rallied for another four months to reach the 50% retracement level.

Comparing today's chart with the chart from 1929 I think we are in early December before the first big correction took place. We got a nice and sharp rally and nearly reached the 38% level. Thus I think we should see quite a strong correction over the next four weeks to about 820-850 and therefore trap all the bears that will have opened their short positions after the market plunged through 870. What should follow afterwards is a second rally to the 50% level over the next months to trap all the bulls that will be sreaming: "New Bull Market".

You all know what follows in the end if this patterns continues to correspond: