robrent,
investor.ft.com
Here's an article talking about the recent violation of the
of the neckline of the H&S pattern. He projects a 332 price target simply because of the 600 point drop from the top of the head to the neckline and subtracting that from current neckline level of about 950.
It has been my experience that accuracy of the price targets
(using classic pattern rules) diminishes the longer you go out in the time frame. That's why I like to use semi-log graphs for long-term charts. Semi-log graphs gives a percentage difference in price rather than the raw price difference.
The drop from the all time high of 1553 to the then neckline level of 935 (I'm simply using the authors numbers here, which are left to interpretation) represents a roughly 40% drop. A further drop of 40% from the breakdown neckline level of 950 gives us 570. Of course, the classical rules state that the price target is the minimum downside target. A belief by many bears that we will go lower than 570 is bolstered by historical evidence that when a bubble burst, price levels usually (if not always) goes back to levels lower than the point at which the mania began.
My belief is that the genesis of the market mania began with confluence of AOL/internet/PC (proliferation)/Iomega/Motley Fools/401K(proliferation)/Gulf War (end of last recession). All of these occurred roughly in the early '90s (late 1990-1993). That level is 370-470. However, I don't think we got to the mania level until we got to 1994. This is when the market had it's best chance to nip the mania in the bud, so to speak, as 1994 was mostly sideways action between 450-500.
Therefore, my minimum target is 500 on the S&P.
However, I don't think we're going to get THE "capitulation" anytime soon. Most "investors" I know have tuned the market out (it's too painful) and have an "all or nothing" attitude (the ultimate gamblers mentality). They have the Death Grip. They rather lose it all with a chance to "get it all back," than sell out now and watch in disgust as the market roars back. Of course, they don't realize that history tells us that this is exactly the attitude needed to keep the bear market alive.
We will most certainly have many more bear market rallies to squeeze out the many bears who mistime and keep the hope alive for the bulls. In the end, most players will end up a lot poorer, including most of the inexperienced bears (which includes me since I've only read about how it felt to trade the 1929-1933 and the early 1970's bear markets). That is what a bear market is all about.
Here's a long-term chart of the S&P.
bigcharts.marketwatch.com
Good trading,
ams |
