Jerry Favors Analysis - Friday, May 27, 2005 8 p.m.
In our May newsletter, which was written the week of May 13 to May 15,
we stated that despite the decline we had seen in stock prices into May 13, we
were not at all convinced that this month's rally had seen any sort of
sustainable top just yet. We stated that our work suggested a probable rise up near
10500 plus or minus 50 points or so in the Dow The Dow began its next rally
phase the very next trading day, May 16, and so far we have reached a closing
high of 10542 on May 27.
Over this last week the Dow has given a short term upside projection
calling for a potential rise up near 10694, plus or minus 63 points intraday.
That projection calls for a probable minimum rise near 10631 intraday, and that
minimum target has not yet been reached on the Dow.
The first sign of potential trouble on the Dow next week would be any
decline below 10426 on a print basis and 10397 intraday, with that intraday
number being the more important of the two. If both of those key levels are
broken next week, a still stronger decline should follow, at least short term.
The preceding discussion addresses only the short term picture.
Further out we still look for significantly lower prices before the year is out, and
into early 2006. Our long term work still signals that the "bull market"
which began at the 2002 bear market lows will end in the year 2005, and a new bear
market should follow into 2006. Our reasons for this position have been
outlined several times in prior newsletters over the last several months.
Perhaps the strongest arguement for the next bull market high this
year comes from our Lindsay Long Sequence, a very long-term cycle which Lindsay
traced back for 200 years. The Long Sequence has had a remarkable record of
forecasting the approximate time frames for bull market highs and bear market
lows, that is, the approximate years when those highs or lows should be seen. We
then use tools like the Lindsay Standard Time Spans to further narrow down the
approximate time frame for the next bull market high or bear market low. This
technique also has been explained in detail in prior newsletters over the
last several months. The odds are high that if we have not seen the final top for
this year already, that top will be seen between here and late June 2005.
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