Elliott Wave Theorist's Monthly SP500 Chart
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Excerpt from The Elliott Wave Theorist March 2003:
Take a look at Figure 1. This picture shows the final high-level support area for the S&P. All other support trendlines (two of which are shown as dashed lines) have been broken, as has the “neckline” of the head-and-shoulders top formation. The lower line in this graph is generated by drawing a line parallel to that touching the “outside prices” of 1976 and 1987. The other illustrated support trendline first served as resistance, in 1987 and 1994. The two lines met in the second half of 2002, which is one reason why the S&P stopped going down in July and October. Prices have slipped back to this juncture for the third time and once again are bouncing hard. At bear market lows, “double bottoms” often occur, but I am unaware of any such thing as a triple bottom occurring, regardless of lore to the contrary. The market, then, is almost surely setting up to break its final support point in high level territory. It’s a “line in the sand” that will probably prove to be a foundation of sand.
Some people say that the stock market can’t go any lower because it has already fallen so much. That’s what they said about the Japanese market three years after it topped out, which was a decade ago. If the Dow had already fallen as far as the Nikkei has, which is nearly 80 percent, it would be at 2380. Of course, if the Dow falls to that level from here, the Nikkei will not likely sit still but continue to slide, in which case the Dow will have to chase it even further to catch up. The idea that the Dow’s bear market could match the Nikkei’s is not, as many would assert, an absurd notion. People have short memories. Thirteen years ago, it was an acknowledged fact that the Land of the Rising Sun was so successful and wealthy that the Japanese would soon own the entire United States. They were the business masters of the world. Does that sound familiar? Today, it is an acknowledged fact that the U.S. is the most successful and wealthy country on earth and the only superpower as well. Bear markets have a way of dissolving such images. Such an image, in fact, is a prerequisite for a huge bear market. Someday, the next bull market will dissolve the world’s negative images, but first we have to create them, and that process has only just begun.
Many bulls assert that Americans’ hard work and ingenuity will keep the economic engine and the stock market roaring. Americans had ingenuity and performed hard work in 1929, yet stocks fell 90 percent from there anyway. Both attributes were present in 1968, yet the Value Line average fell 74 percent. What does hard work have to do with the future trend of the stock market? Nothing. The irony is that many people in fact abandoned hard work half a decade ago to earn an easy retirement from stock investing. Their ingenuity went into asset manipulation instead of production. So the theory is wrong, and even the basis for its application is suspect. |
