Today I went through the 2000-2002 bear market and looked at when the intermediate term lows formed in relation to the prior intermediate term low. And I wanted to just mention that general pattern in relation to our market right now.
There were 5 intermediate lows in that bear market where price broke below a prior significant low. The percentage declines from the prior low to the next low were 0.9%, 5.7%, 11.3%, 6.6%, 4.4%. Our current market is about 4.8% below the January 2008 low, so it is in that range.
The more consistent pattern that emerged was that the new low would typically occur around the 127.2-141.4% retracement of the previous uptrend/bear market rally. Our current market is right in that range as well. Today's low was about 60 points shy of the 141.4% retracement of the January to May 2008 bear market rally.
In conjunction with other extreme pessimism currently, past precedent would tell us to be on the look out for an intermediate low soon. What we are missing right now, is a very wide range capitulation type day or a huge up day. The best risk/reward comes when you get a classic candlestick reversal and can enter immediately after that day and set your stop below that day's low.
Pete
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment