I think Hussman makes some valid points, especially making use of a longer term history and focussing on the dynamics of the interest rates (raises vs. cuts over time) rather than purely looking at individual earnings yield vs interest rates at any one time. For anybody interested on building and verifying their own model here's some 100+ years worth of EPS, inflation rate and interest rate data to start with: http://www.econ.yale.edu/~shiller/data.htm (click on HTML, XLS or .ZIP)
Having lived with the market for 15 of those years, I say your black lines are a no more than a trend line that defines our over eager bubble back in 2000. You can't condense all the variables that made the S&P during that charts time frame between two black lines. Nor does 1987 have much to say about 2007. Put that channel away. it does not apply anymore than it did in 1997. As the perma bulls say on Elite Trader: "Its all UP from here, baby"
Bollinger Bands are the most common technical analysis tool that traders use on a day to day basis. In fact, I have found that they can save you quite a bit of cash. Its a very simple tool that uses the 20 day moving average and standard deviations. Simply put, when the price shoots high up over the top band then it has little chance of survival and will come down. When the price shoots way below the bottom band, then you have a good chance that it will go up. I know your style. Buy the "good stocks" and hold. However, you must re-read the name of this website. I see "elitetrader.com" NOT "eliteinvestor.com". Your style is more akin to investing where as the crowd on this website is specifically here to trade and they do. They go way beyond the common stock to trade the ES and other such instruments.
That's why computer systems, traders, and the rest of Wall St. is at least somewhat faithful to TA and only cheeseburger eating geniuses like you are smart enough to buy 20 shares of GOOG and hold it forever.
It looks like we will have our handle afterall. EW wave 5 ended at 1540......now we see the ABC correction underway to form the handle.......textbook. The last ABC correction forced the price down to the 40week MA (14.25'ish).... only 65 points from here. Do we dare fear this could happen again this time?.......even briefly? SAY it isn't so...please.
EW is a bunch of crap just like 95% of all TA. Where was all this "textbook" nonsense 3 days and 400 DOW points ago? Everything in TA looks "textbook" after it happens.