Monday, December 3, 2007

S&P long term chart

Friday I posted that the S&P had bounced off resistance at the 90 DMA. So far this week that resistance is still holding.

I find it's often helpful to look at really long term charts and get away from the short term noise. We can see here that the last time the 90 DMA turned down sharply and moved under the 200 DMA was the fall of 2000 as the bubble was in the process of bursting. For the last several months we have been watching the bursting of another bubble. The credit bubble. The market may still bounce into the end of the year. The odds are still in favor of that scenario but I think the catalyst is now in place for the markets to move down into the 4 year cycle low.
This bull is now tied with the 82-87 4 year cycle for the longest trough to peak at 60 months. Once we get past this bounce/rally we should be setup for the final decline. History would suggest this decline has the possibility of being especially violent.