Wednesday, August 15, 2007

SnP500 Analysis, August 15, 2007

"Money flow is based on sentiment of humans and always follows the same patterns on a macro scale. I assume that the reasons are different each cycle - but the actions are always the same."
- Andy Jaskey

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I took a look at the 10yr chart of SPX. Here are my thoughts on it:

The other interesting thing that I read is how this current market plunge is compared to the panic during the summer of 1998.
(courtesy of Motley Fool Board member Andy Jaskey.)

The correction of 1998 took 12 weeks to play out completely (bottom and retest of bottom). If that same script plays out again this time around, we should see one to two more weeks of pain and a couple weeks of recovery before the retest. And if the script of 1998 truly plays out this time around, we will also see a plunge down to 1244 (20% correction, just like in 1998).
If we just visit the 1240-ish level and bounce back up from there, then there is no bear market, and the 4yr uptrend (as outlined in my 10yr chart above) is intact. However, the longer we linger around below 1250, the more precarious this bull market becomes, and the uptrend will be in serious jeopardy.

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