Revisiting the Ultra-Bear Projections

It has been some time since I’ve posted some bearish charts. Obviously, I have been wrong the whole way up (as have many others), but now I’ve started to notice a doll-drum atmosphere amongst financial bloggers that I have participated in. I’m feeling that it doesn’t even matter any more, whatever I post will be wrong.

However, having reviewed some long-term charts, I just want to reiterate my bearish prognosis for the SPX.


The chart above is the Quarterly SPX charts since 1930. The wave count I posted above is generally accepted as the long-term Elliot Wave count. In 1994, I can imagine that the Elliot Wave buffs were projecting a top around the 450-500 level based on price reaching the upper end of the channel. This level was ‘supposed’ to be major resistance, but the market just barreled right through it, and that trendline became a new level of support.

15 years later, the market convincingly breaks back below that level of support (as you can see in 2002). My guess is that if the market resumes its downtrend, it will not find major support until the 450-500 level. In my experience, when a level that was supposed to be major resistance breaks, that level then becomes major support, as all the sellers in that region provide demand when price finally retests that point.

I think this downtrend will commence soon, as price is back-testing the uptrend line, and the market environment has become very complacent. Good luck to everyone!

1 comment:

Dave Narby said...

That fits well with p/e's having to be in the mid-single digits for a bottom to be in.

I believe we touched a p/e for the SPX of 9 at the March lows, but IMO that isn't low enough.

I think we could even see SPX 350 on an overshoot.