1) It is the bottom. The bull market is still alive and the correction is over -- we are going to new highs in SPX.
I give this <5% chance. The bull high set in 2000 was a mania top with astronomical valuations that will stand for >10 years.
2) First leg of the bear is done -- the 'A' of a larger A-B-C move. The low will endure for a year at least.
This has a 10-30% chance, mostly based on the depth and duration of decline in tech, and the possibility that the October double bottom was the four-year cycle low to match 1998. This would require more insider buying, IMO, but perhaps pension fund rebalancing and all the built-up short seller profits permit this. It has valuation, money flows, the dollar, sentiment, and fundamentals all stacked against it, however. I also suspect the commercials would be long for this event.
3) This is the terminal move of a flat begun out of the July lows and we soon turn down to new lows.
I remain suspicious that there is a flat, except in select issues. For the majority of stocks, October was a fresh impulsive low.
4) This is 'a' of a larger correction. We'll go sideways/up for months yet before threatening the lows.
I favor this scenario, 70% probability. It mixes in seasonality, pension fund rebalancing, cycle lows, and still puts us to fresh lows in a few months. I would say many weeks, not many months. Should run around 15 weeks total, terminating right around the beginning of 2003. The fresh down will be wave "C" of a double-three off the bull market top in most indicies.
It means we're correcting just the down since March. We have a single completed corrective structure now, but it is unlikely that 30 weeks of down would be corrected in just four weeks of up. I think it takes more time, if not price as well. Therefore, I put us in a "b" down here to work off the excesses we've built on this rally, but there looms a multi-week brother to the last several weeks.
One should also note that almost all scenarios point to more down before more up, to at least a 38% retrace of the recent move up.
BC |
