Phillip,
If 1060 SPX is taken out on a closing basis twice at any time, or 1080 is taken out after Sept. 1st, then I will wholeheartedly agree that the bull is in deep trouble. Otherwise, any price action that occurs is within the overall bull trend. The bull wouldn't be dead unless 960 on the SPX were taken out.
A break of 1060 will target 960, and a break of 960 will immediately target 900, If 900 gives way, then the worst is upon us, and we'd be heading for the under 800.
These scares have come often enough, but there is one very important thing different about this one: At the Favors seminar in NY last weekend, i learned of an indicator called the "Titantic Inidicator." It's implications are both extremely deadly to the Bull, and very reliable when it pops up. Simply put, the Indicator gives a bellowing sell signal when new lows exceed new highs within 4 trading days of an important peak. The last time this indicator fired a sell signal was in August, '87, several days after the peak in prices. The indicator has only fired a sell signal a few times in this century, all with devastating effects, according to Jerry Favors.
The BLARING ALARM SOUNDED for the first time in nearly 11 YEARS on Tuesday, 7/21/98, the day after 7/20/98 peak, when new lows exceeded new highs immediately after the peak. This coupled with Jerry's Cycle indicators and Bradley indicator calling for a significant top in that time frame, should have already lead me to believe that the top is in. Friday's action may have clinched that.
I believe we're gonna experience an '87 debacle again very soon, and believe it will probably begin in September. But take a look at the '87 chart, and notice that prices didn't just collapse from the peak. After the initial 10 % decline from the peak, you'll notice that prices rallied back about 7%, then the crash ensued. I believe we'll see a similiar scenario, with a rally from 8/5 at 1075 SPX back up to around 1150 SPX into early September. From there, one would have to make preparations for the worst. A crash day 55 calendar days from the peak would have the market in free fall by Sept. 15th, with 790 SPX a minimum target. We'll see.
Regards,
David |
