Sunday, January 3, 2010

2010 ~ Bear Market - Chapter 2

2008 was ruled by the bears.

The bulls dominated 2009.

2010 - it's time for the bears to strike back!

Within some days I expect this bear market rally to finish. From there the market should start a new severe decline over the next one or two years and fall well below its March 09 lows. I still like the 450-500 points area in the SPX as a bottom for the entire bear market.

The clue, whether the bear market rally will have topped or not, will give us the next wave pattern to the downside:

Let's say we'll get a move down towards 950-1000. If this move down unfolds as any corrective pattern (i.e. only three waves) we can expect another rally up to 1200 or 1300 for the rest of the year.

But, and that's what I'm expecting, if we get five waves down, we'll have to be very very careful because the next crash might be just around the corner.

While I'm clearly favouring the downside I won't dismiss another big rally in 2010; as I've said, after the first wave down I should be able to tell whether a big bear is coming or if it's just another bear trap.