BOTTOMS VERSUS TOPS... While looking at the five-year bull run, I was struck by the inverse similarities between the April 2003 breakout and the January 2008 break down. The yellow areas show the start of the bull market and the beginning of the bear market. The first big trend reversal started with two lows around 4700–4800 and a resistance breakout in April 2003. There was a consolidation just above the resistance breakout and then a continuation higher. Thus began the bull market.
Chart 8
The next big trend reversal started with two highs around 10200–10300 and a support break in January 2008. The index consolidated just below the support break over the last few weeks. Look for a move below consolidation support to signal a continuation lower. The bull market lasted 5 years and carried the NY Composite from 4600 to 10300. That's over 100% in five years, which is not a bad bull run at all. Remember the two steps forward and one step backward analogy? A 50% correction (one step backward) would carry the index back to around 7500.
Chart 8
The next big trend reversal started with two highs around 10200–10300 and a support break in January 2008. The index consolidated just below the support break over the last few weeks. Look for a move below consolidation support to signal a continuation lower. The bull market lasted 5 years and carried the NY Composite from 4600 to 10300. That's over 100% in five years, which is not a bad bull run at all. Remember the two steps forward and one step backward analogy? A 50% correction (one step backward) would carry the index back to around 7500.
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