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Saturday, August 1, 2009

1032 SPX and The 1930 Rally

It would be easiest if I just explain these charts from top to bottom:

Chart 1, current SPX P2 rally daily:
When stepping back and looking at the wave structure on the long term daily or weekly, P2 is starting to form an "A-B-C" look about it. Or in other words a "three" pattern. I still have it as a triple zigzag because it works well and is sound EW theory and it counts well.

As far as the SPX, a nice Fibonacci relationship will exist at 1032. That would be where the rally from the March 666 low to the (Y) wave 930 peak (263 points) multiplied by .618 Fibonacci = 1032 for (Z) wave peak. This is where it also meets a Great Bear down trend line (trend lines are subjective of course). 1032 is also about 12 points shy of 1044 which is a Minor 4th sub wave extreme which is where EW theory has a typical wave 2 retrace going to.

1032 would also be a 40% retrace, above the accepted minimum of a 38.2% Fib amount. But in price percentage terms the move from 666 to 1032 would be a 55% price rally which is indeed in the realm of where a sharp wave 2 is supposed to retrace.

Some might say, "Well, EW theory also says that wave 2's often retrace 50% Fibonacci or even 61.8%". What I say in response is that the NASDAQ may well reach those levels (NASDAQ already is past 50%). The qqqq's could reach the 61.8% mark. So that would indeed be very satisfying.

And speaking of the qqqq's which I recently charted, these will soon run into a mega-ton of resistance.

When your best, most cash-rich secondary index cannot advance any farther due to overwhelming resistance, where else is there to go but down? The qqqq's will help us find P2's peak indeed.

I do believe we are in the "public participation" phase of the P2 rally.

Chart 2, 1930 Rally:
But another reason is I still maintain the triple zigzag count is I have been looking at the great 1930 rally, which you could say was another Primary [2] type rally, a sharp quick rally. A disbelief rally not unlike what is going on today. That too ended and the amount of drop was incredible. The current rally also counts well in the amount of trading days compared to what the 1930 rally experienced. Compare my two charts and you will see the trading days superimposed on the charts. We are approaching 1932's amount of trading days. However, I believe we will experience a little bit longer trading time span than in 1930 so the end is just a guess. Perhaps P2 experiences more trading days than I threw on the chart. But you get the idea. We are closer to topping than you may realize is the point.

Chart 3, Current Primary wave 2 rally:
Again, I show a comparison and a projection based on a 1930 triple zigzag count. Exact? Of course not and its not ever supposed to be! But social mood patterns have similarities. And we experienced a great drop in 1929 and followed it up with a spirited rally. Same as today.

But what happened after the 1930 rally?

Well check out my last chart, chart #4, A Long term EW chart I have posted before. This chart has two green circles of the previous two charts. Notice the tremendous fall in 1930 on down to a low several years later. That happens to be what I am projecting in today's current charts. A drop to the lower purple extreme grand supercycle trend line. Below DOW 1000 in the next years to come. Notice the extreme angle of dropoff in 1930 on down to the bottom in 1932. Extreme yes? I am proposing the same basic will occur over the next several years.

But you might say "Dan, your smokin' crazy bro, the 'gummint ain't never gonna let that happen, GS rules the world and stuff!". Well, if you think a small cabal of mere mortal men can control the social moods of 6 billion living souls, then I say your wrong.

It was only 1982 and the DOW was less than 1000. Are we not in the same generation? Was that so long ago?

Notice one last thing on my last chart: Everything above that long-term purple channel was an extreme wave 5 blowoff and then the 2007 rise was a cycle b wave blowoff. It was borrowed money and borrowed social mood. We didn't want the party to stop and so we borrowed from nature to keep things going up. The current P2 rally (chart 3) is challenging going back above my extreme long term grand supercycle purple trend lines. It ain't happening. So in other words, you can view this current Primary wave 2 rally as a massive "backtest" of the grand supercyle upper channel line. Awesome yes?

The laws of nature will prevail. You must pay back what you borrowed. We borrowed a heck of a lot of social mood at the peak of a grand supercycle wave III that lasted as long as America has existed.

P2 tries to keep the party going again still, albeit, at a smaller level than the 2003-2007 cycle b wave rally. But all things come to an end. 1930 is instructive. History always repeats in some form or fashion. Its the nature of things.

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