Wednesday, June 30, 2010

U.S. S&P 500 Stock Market to Stagnate for Five Years in Secular Bear Market

The U.S. Stock Market, as represented by the S&P 500 Index, could stagnate for a long time period (such as five years).

Long Term S&P 500 Price Channel Since 1950

Since 1950, the S&P 500 Stock Market has been in a consistent price channel, until the year 1995, when the S&P 500 starts the runup at an unsustainable rate, until the peak in 2000. During the time period starting in 1995, the S&P 500 has gone above the long term Price Channel.

We are just starting to see the S&P 500 get back to the top of the normal long term price channel.

In the Reversion to the Mean Theory, this means that the S&P 500 will have to trade sideways for some time to remain consistently in the channel.

Based on the lines above, the S&P 500 should be trading around the level of 500 to 1200.

Five years from now, the S&P 500 could be trading from the 600 to 1500 level, to remain within the long term price channel.

We are in middle of 17 Year Secular Bear Market

Over the long term, the U.S. Stock Market Appears to be in Bull Markets or Bear Markets (Secular Bull Market and Secular Bear Market) for an average of 16 to 17 years.

One grouping consists of:
  1. 1906-1921: Secular BEAR Market
  2. 1922-1928: Secular BULL Market
  3. 1929-1949: Secular BEAR Market
  4. 1950-1965: Secular BULL Market
  5. 1966-1982: Secular BEAR Market
  6. 1983-1999: Secular BULL Market
  7. 2000-????: Secular BEAR Market

This means that if the current Secular Bear Market started in 2000, and if the average Secular Market consists of 16 to 17 year time periods, then a new Secular Bull may start around the year 2016 or 2017, consistent with the Price Channel Behavior above.

More Details on Secular Bull and Bear Markets including Charts

Today's S&P 500 Chart

Monday, June 28, 2010

Head and Shoulders Top? S&P 500 to Consolidate and find Lower Trading Range

S&P 500 Market Top?

The U.S Stock Market as represented by the S&P 500 has made a good run, from S&P 500 level of 666 to 1219.80 for a strong rally.

However, based on the Chart Annotation above, the S&P 500 may have hit a Head and Shoulders Top, a Technical Pattern (analyzing patterns based on stock chart patterns) that suggests that a Top has been made and a downtrend could ensue.

Consolidation Pattern then Breakdown or Breakout?

Longer Term, the S&P 500 market may re-test the Previous low of 666, or a more likely situation, the S&P 500 market will start to consolidate into a sideways Symmetrical Triangle Pattern as shown in the chart above.

In the Symmetrical Triangle Pattern, the Stock or Market trades in the triangle, until it reaches closer to the end of the triangle, and then the market may break upwards, or downwards.

The Market does look like it may be going lower and find a lower trading range for now.

S&P 500 Stock Chart Today