S&P 500 close to 50% retraction.

Discussion in 'Trading' started by Runningbear, Jul 24, 2002.

  1. This is my post from 38 days ago. Back when the S&P 500 was above 1000. I was looking for support at 775 but given the speed of the recent sell off and the total lack of any buying support, Im thinking that the mid 600s could be closer to a bottom now. I'm sticking to my time line for a bottom around September 20th. But the bottom could come in as early as the 10th. Please note, I'm not calling an all time bottom, just the bottom for the rest of 2002.

    06-16-02 04:37 PM


    This year like many before is conforming to a well established pattern. Cycle high in Jan, cycle low (projected) September.

    775 would be a 50% retraction from the all time high. Logical support you would think.

    20th of September give or take one or two days. One year from the post Sept 11 low. A pretty basic squaring of time and price.

    Also if you draw a trend line on the 10 year SP chart across all the major bottoms of that period, a retraction onto this very long term support line comes in around the 700s.

    If (when) we take out the Sept 11 low, there is simply no significant support levels between there and the 700s.

    Also if you draw a trend line intersecting the two major lows since the all time high. March 2001 and September 2001. It projects down to reach the very long term support line around the 700s also.

    We need to take out last Septembers lows to complete three down waves. The longer it takes us to do so, the sharper the sell off will be when it occurs.

    From a fundamental perspective, 775 would put the S&P 500 back at a PE that instos could deem 'affordable' to buy for the longer term.

    So I believe a lot of money will enter the market around the Sept October period. But not before the crystallization of (very large) tax losses this year.

    Im expecting a run up into the end of the month. Maybe as much as 100 points from fridays low. But July 1st the shorts go back on.

    This is exactly the same method I used to project the Nasdaq high in December 1999. Except I called the high for late April and it came in a little earlier.

    775 may sound drastically low for a lot of people. But we've already sold off over 500 points. Does another 200 or so seem unrealistic. It kind of seems logical to me.

    And before anyone attacks me, please offer your own projection and methodology first.

    That said, always use stops.