Jerry Favors Analysis - Friday, March 15, 2005 8 p.m.
For most of the year 2004 it was our position that the bull market which began off the October 2002 bear market low would peak in the year 2005, and a new bear market would begin from there. Our Lindsay Standard Time Spans made it quite clear that the next bull market high would occur in 2005, and that the following bear market would continue into late 2005, or more likely, early 2006.
One of our primary reasons for looking for the next bull market high in this time frame came from a very reliable pattern discioverd by the late George Lindsay, called the 3-Peaks and Domed House pattern. The vast majority of all bull markets over the last 150 years have traced out some version of this same pattern before the final bull market high.
At this point it appears the 2005 bull market high in the Dow was seen on March 7. If so, the primary direction of stock prices for the rest of this year will be downward. However, from a short-term standpoint, the Dow should be very near at least a short term low already. If we did not see that low on Friday, April 15, the odds are high that short term low will be seen early next week, and a fairly strong rally should begin from there.
Our longer-term position is based on the long-term forecasts of our Lindsay Long Sequence. The Long Sequence is a long-term cycle which forecasts the most probable years for future bull market highs and bear market lows over the following 20 years after the prior bear market bottom. In the current Long Sequence the next bull market high is due in the year 2005, and the next bear market low is due in the year 2006. After the bear market low in 2006 the stock market should then begin the next major, long-term bull market. In fact, the bottom in stock prices between here and early 2006 should be followed by the next great, long-term bull market in stock prices Our work suggests that the low due between here and early 2006 will not likely be seen again for many years. That will be the next important time to buy stocks and hold for the long term. For now however, we must do everything we can to preserve our capital until the next great long term buying opportunity presents itself.
If our long-term forecast does prove correct, this would not mean there will not be excellent opportunities to make significant profits over the next several months, whether the Dow is moving higher or lower over the next 11 to 12 months. Our goal is to stay with the trend, whether prices are moving strongly higher or strongly lower. If the market is moving strongly lower over the next few months we will be short. In fact, it is easier to make money on the short side when prices are moving down than it is to make profits when prices are moving upward. That is because prices move down in a bear market much more strongly than prices move up in a bull market. We will be giving subscribers specific instructions on where and when to take new positions to make strong profits even if the market is moving strongly downward. Also, even if the market is going lower this year, there will be periods when extremely strong rallies will begin, and some of those rallies will last for several months or longer. Our goal will also be to be long when those very strong rallies begin. Those rallies should be fairly predictable from here.
For the short term, the Dow should be near the next important short term bottom in this time frame. That low should be seen early next week, and a fairly strong rally should begin from there.
If we are wrong about a final high in this time frame, the odds are extremely high a final bull market high will be seen between April 28 and June 28 of this year, and the bear market would begin from there.
We will have more specific instructions for you on next Friday's April 17 update.
JerryFavors.com
