What Stock Market Final Highs and Lows Have Looked Like

The decline from this April to June in the S&p 500 fit very well in price and time with typical average corrections throughout history.  It did not fit well with the typical 1st leg down in a bull market.  So on this basis it may have been expected for prices to rally to new bull market highs based on the character of the moves.

Currently, with the markets very close to the year's highs, it seems very likely that the highs will be exceeded, even if this is still part of a drawn out topping process.  One thing that I believe many less experienced market analysts or market novices experience is a simple view of support or resistance and expecting or "hoping" that a certain high or low will not be violated because that would throw off their outlook, etc.  But from experience I can confidently say that many and probably MOST important highs or lows, actually exceed a prior important support or resistance, at least slightly, before actually reversing into a major new trend.  As brief evidence of this I will review the major highs and lows since 2000.  The situation at each of the 2 major highs and 2 major lows since then has been for a sharp 1-2 month correction against the trend, followed by a final 1-2 month move into the final high or low.

The last correction prior to the 2000 top was a 56 day 10% correction, which led to a 17% 25 day final advance to the high in March of 2000.  The final high exceeded the previous rally high by 5%.  It took 4 trading days after the final high for the market to trade back below the prior intermediate high.  And it took 13 trading days to close back below the prior intermediate high.

The rally up before the 2002 low saw 29 day 24% advance which led to 20% decline in 49 days into the Oct 2002 low.  The final low was 1% below the prior intermediate low.  The market closed back above the prior intermediate low on the day of the final low.

The final correction before the 2007 top was a 31 day 12% correction which led to a 15% advance in 56 days into the final Oct 2007 bull market high.  The final high exceeded the prior intermediate high (from July 2007) by 1.3%.  The market closed back below the pior high on the day of the final high.

The last rally before the 2009 low was a 46 day 27% advance which led to a 29% final leg down in 59 days into the March 2009 bear market low.  The March low exceeded the prior intermediate low by 9.8%.  It took 4 trading days to regain the prior intermediate low.

Now there are other market cycles that can be studied, and other markets that can be studied, but the tendency is for sharp short-lived corrections to preceed the final legs up or down.  And the final legs up or down have been relatively brief at 1-2 months. 

So at the current juncture, this is something to watch for.  We have already experienced a 63 day 10.9% correction.  And we have rallied for over 2 months into what looks like will be a new high.  So to fit the mold of a market making a final bull market high, we may be likely to see a mild to moderate break of the April 2012 high of say 1-2%.  In this case, I think it would be ideal for the market to slightly exceed the May 2008 high on the breakout as well.  This would be about 1.5% above the April 2012 high.  Then that should be followed by a reversal to quickly close back below the April high.

So that is a descriptive projection of what a final high for this bull market COULD look like.  If we break to new highs, I will track this scenario.  And also I will review this with charts in an upcoming video to get a better visual.

Based on the price logic pattern in the markets, I do still expect a failed breakout followed by a significant correction.  A move to new highs does NOT invalidate the topping pattern as I have been tracking it.  I will go over what level would invalidate that in a future video.