Tuesday, June 17, 2008

weekly charts

I hope everyone that took advantage of this weeks offer of the weekend report enjoyed perusing my thoughts on the market. The response to the weekly report was surprising to say the least.

I want to start off with a very long term chart of the S&P. What I want to concentrate on is the 75 week moving average. During secular bull markets this average tends to act as impenetrable support. Take notice that during the entire secular bull market. This average only turned down briefly in 87 and very slightly in 90. It turned down and stayed down for over two years once the secular bear market started it turned in 2001. Now notice that the 75 week moving average has again turned down for only the 4th time in 28 years. Even more concerning is the fact that the market has penetrated the 200 week moving average. That has only happened one other time in the last 28 years. I don't think there is any doubt that we are in a long term secular bear market and that the bear is waking up again after a Fed liquidity induced hibernation of 5 years.

Now lets take a look at the weekly chart. As everyone knows by now I like the weekly charts as they eliminate the daily noise and give one a clearer picture of what's happening in the market.

Anyone who got this weeks report knows I think we are moving down into the coming 22 week cycle low soon. I've pointed out on the chart that almost all 22 week cycle lows don't end until the market gets oversold on a weekly basis. You can see the market isn't really close to being oversold yet. I also pointed out this week that we should expect the half trading cycle bounce and I think we are in it now or perhaps it is already rolling over. Once this bounce fails we should get another leg down into the final low. At this point I still expect the Mar. lows to hold. However if they don't then it is very possible that we have already put in the top for the next 4 year cycle. A top after only 5 months would be incredibly bearish for stocks.

Regardless even if this doesn't end up being the top I do think this cycle will be a left translated cycle. The 1998-2002 cycle was a left translated cycle. Left translated cycles are very bearish for the market. The worst declines in history have come from left translated cycles. The 32 cycle was left translated. So was 74. Obviously we'll just have to see how things play out but I really don't have a lot of optimism for the next 3 years.