Is a recovery for the stock market in the cards?

If you read my work from this week on the SPX, there were a couple of things you could take away.

Firstly, when price targets are not met that would prove the market can go lower, the you have to expect that it's going higher... On Thursday of this week, when it looked like Armageddon would strike, there was a spirited discussion about whether or not we were going lower. Now the benchmark for the SPX to prove it could go lower was the 2 lows at 1369 and 1369.02. On Friday after MSFT reported and on a reversal of the futures pop from overnite, I put up a thread that laid out a conservative low volume low target of 1379.25 as a target for the weakness. Now we only made it to just slightly under 1380 and never tested that target... so, once again, you needed to suspect that if they can't break those targets we'll go higher... and that was the case.

Now the second takeaway is this. On the ensuing bounce off the untested target, I laid out the fibonacci targets at .50 and .618. I pointed out that when we retrace much over a .618 that the entire move will normally be retraced... that in fact was also the result...

Now, let's apply the second takeaway to the present situation in the market to try and establish some parameters as to WHEN we can suspect that this entire move has been a correction in a bull trend rather than a BEAR trend...

So starting with DJIA

High - 14279
Low - 11508
.50R - 12893 (this week)
.618R- 13220

NAS

High - 2861
Low - 2155
.50R- 2508
.618R-2591

SPX

High - 1576
Low - 1256
.50R -1416
.618R-1453

So that pretty much lays out the prices we need to see to PROVE the market is still in a BULL trend

DJIA 13320
NAS 2591
SPX 1453

So, while there is SPECULATION that we may have a recovery... there's still no PROOF.

Now let's look at TIME....

Bill McLaren whom I read and refer to on a regular basis on this site has laid out some countertrend cycle time targets to establish whether or not the present trend is a countertrend or we're in a BEAR market...

Now you can read about that here and view his chart on the SPX:

http://www.mclarenre...rope/Page1.html

For the past two months I have indicated if this move up was an intermediate term counter trend up in an on going bear campaign the index you go up into this time window and trend down. The trend up since the "false break" low has been weak and that was a requirement for the counter trend scenario to be valid. It is struggling at the "obvious" resistance and that is not a confirmation since that is normal no matter which direction the trend. So the probability still exists but there is no confirmation yet. If the index could move past this time window it would indicate this is not an ongoing bear trend. But the "TIME" is now through the 2^nd of May for the index to resume the bear campaign if the trend is down.

There's a lot of cacophony in the posts on this site, we have some hard over bears, some hard over bulls that post here... now the real truth is no one really knows. There is a normal amount of euphoria we experience as the market moves higher present. But I just wanted to share this set of price and time targets with you so we can define and measure the probabilities of our being in a bear or bull market.

You see we're not that far away in price or time, so for me, that sets up a low risk/high reward shorting opportunity... Why? Because we are so close in time and price that my exposure on a time and price basis is limited... we're going to know more at the end of this week... a lot more.

I hope this helps...

SB

Edited by SemiBizz, 26 April 2008 - 12:11 PM.

Great post semi. Regarding trading, I do the day. "Bull" or "Bear" doesn't exist there but, I also have an interest in returning designated long-term monies back into the equity markets that I removed last summer. There the longer term, big picture matters. I see it similar to an action movie, a Clint Eastwood movie if you will. I don't know how long the movie is going to be. I don't know all the twists and turns of the action until it happens BUT, I do know how it's going to end. Clint lives, the bad guys die. As I've said before, I think IT traders have it a lot harder than ST and LTers. I personally think in the environment we are in now, it's too much work and too much chance but, that's my opinion and taste. I'd rather surf the daily waves. Long term. "Clint lives" means that, in my opinion, sometime within the next 12 to 18 months I will see a re-entry area for my long-terms where the S&P will be at most in the 1160 and at least 1000 area. I expect an, "The sharks are gone. The water's safe." bull run before then but, the risk/reward for me to chance being able to get back in and get back out when it peaks before the trap door opens is not good enough at this point when I know if I wait a year to a year and a half I will get what I'm looking for. I feel so sure of this because of the economic facts of life that are unfolding and what that portends for the future. The big drop will be as a result of how all of this will roll down to "Main St." All the anadotal pain you hear about on Main St. is still nothing compared to what is coming for Joe and Jane Sixpack and THAT is what is going to affect the equity markets the most. It's consumer spending or lack thereof that, in the end, affects markets the most. What has happened to banking stocks now gives you a clue as to what is going to happen to the rest of the markets once the consumer, Joe and Jane, really start to feel it. As far as the discourse on this board, it's gotten so "yahooish", it's not worth getting involved with alot for me anymore with certain posters. By the way Semi, I've always prided myself in having a rather large vocabulary but, I had to go to dictionary.com when I saw "tocophony." I could not find the word. The closest I found was "tocophobia": Main Entry: tocophobia Part of Speech: n Definition: a fear of childbirth Etymology: Greek tokos 'childbirth' I'm going to stick my neck out here and assume you are not implying that you see a lot of fear of childbirth in the posts on the board so, I was wondering if you could either define it for me or use a different word for what you were trying to say there.

Edited by milbank, 26 April 2008 - 11:41 AM.

Oops... must have had mexican food on the brain...

I meant to type cacophony...

ca·coph·o·ny // əni/</FONT> Pronunciation Key - Show Spelled Pronunciation</SPAN>[kuh-kof-uh-nee] Pronunciation Key - Show IPA Pronunciation </SPAN>–noun, plural -nies. 1.harsh discordance of sound; dissonance: a cacophony of hoots, cackles, and wails. 2.a discordant and meaningless mixture of sounds: the cacophony produced by city traffic at midday. 3.Music. frequent use of discords of a harshness and relationship difficult to understand.

I'm not

Oops... must have had mexican food on the brain...

I meant to type cacophony...

ca·coph·o·ny // əni/</FONT> Pronunciation Key - Show Spelled Pronunciation</SPAN>[kuh-kof-uh-nee] Pronunciation Key - Show IPA Pronunciation </SPAN>–noun, plural -nies. 1.harsh discordance of sound; dissonance: a cacophony of hoots, cackles, and wails. 2.a discordant and meaningless mixture of sounds: the cacophony produced by city traffic at midday. 3.Music. frequent use of discords of a harshness and relationship difficult to understand.

That one I know and I agree.

Edited by milbank, 26 April 2008 - 01:10 PM.