LT and IT thoughts

Last time i updated my LT thoughts, i said, we were close to completing the Phase I of the bull market, around SPX 1620 level and by Oct-Nov 2007.

http://nav-ta.blogspot.com/2007/07/lt-market-thoughts-update-1.html

I was wrong on both the counts, in that, the SPX topped at 1555.90 and 3 months ahead of my time projection. The final wave 5 of C, which i thought at time would reach 1620, happened to be a muted one. I posted at that time that the dreaded X-wave would follow after the wave C of Primary degree wave B ends. Given that we have seen the largest monthly bar after the rally begun in 2003, i have no doubts that we are already in that wave X.

It's hard to pinpoint a target with accuracy at this point as to where the wave X would end. My preliminary guess would be around SPX 1360-1410, based on how the wave is unfolding. We still need to see a reaction on the weekly charts that fails, to come up with a proper price projection low for this wave X.

From a LT perspective this bull market is far from over. In fact, if anything the bear market of 2007 is coming close to an end. Yes we may have another month or so pain and another 50-100 SPX points downside. But a major bull market (phase II and final phase of the bull market from 2003) should begin after that.




Looking at the weekly charts, we have seen the most intense downside momentum since 1994. We know what happened after that. That's right. A reading of -248.78 on SPX weekly on the CCI(14). Now here's what is more important. Even this kind of a nosebleed momentum has not turned the 8 ema below the 34 ema on the weekly charts, keeping the weekly uptrend intact. What does this say ? Two things - PANIC and Absence of any topping process ! Looking at the internal measures, relative to the price damage it's PANIC. The lack of topping process is also evident on the charts itself. A slow topping process would have rolled the 8 ema over and brought it closer to the 34 ema before the big selloff happened. In this case it was panic from day one and so far has shown no signs of any bottoming. That's the characteristic of X-waves. They show no topping action and they come out of the blue.

We have seen the worst of the internals. The internal and the momentum low for the market is in. Looking at the daily charts, we are approaching a ST low. We should rally here for a couple weeks and then dive off the cliff to a climactic price low. That should end the quick and dirty bear market of 2007. I expect phase II of the bull market into 2009-2010 thereafter. We'll see...