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Noel Campbell It's been an interesting couple of weeks on the SPI200 since the passing of the March Equinox. The market initially came off the top pretty heavily, but has managed to hang in there for a week or more now. The run down for 5 consecutive days out of the top, has been a rarity during this bull market and well worth noting.
It's with a degree of trepidation that I discuss the topic of where the top is. But we are at a very interesting time when looking at much bigger picture cycles. David Bowden talks openly about how he used the 180-week time frame to call his October 1989 top. In Chart 1 I have run back in intervals of 180 weeks from the recent 21 March high. Going back 180 weeks takes you to 8 October 2001, just 14 days from the September 2001 low. Step back another 180 weeks and you're back to 28 April 1998, just 12 days from the April 1998 high. Finally going back 540 weeks (3 x 180) puts you at 14 November 1994, which is just 9 days from the November 1994 bear market low. You can't tell me that's not amazing!
On each occasion we are out just a little, up to 14 days, but we are also talking big time frames here. We should note that all the turns came in before all our dates when going back in weeks. Interesting point, if you go back 14 days from the 21 March 2005, takes you back to 7 March, which is the top of the market for the Dow! Like I said, we are at very interesting times, you can see why we were hotting up on looking for a top around mid-February and beyond.
Chart 1
click chart for more detail
In Chart 2 you will see we have zoomed into the more recent market action on the daily bar chart. When the market first came off the 21 March high, it eventually found support, forming a double bottom with the late February low of 4069. Now the swing off the top could easily be considered worth watching as an, ‘Overbalance in Price' and ‘Overbalance in Time' on the daily chart – which are both signs to watch out for a trend change. If the market is going to ambush the double bottom and head further south, then the first key test on the upside is the 50% danger zone, which is either 4188 as on the chart, or 4182 if you use the average of the double bottoms to determine your reference range.
Chart 2
click chart for more detail
The market has already failed once to breach the 50% level late last week, but as I write this morning (Wednesday) the market is poised to retest this level today. A key here is will it be a high volume or low volume retest. To be convinced the market is going to break this level and push higher I'd like to see at least 2 to 3 consecutive closes above this 50% level before even considering it. For now I'm watching for the failure to hold above this level with certainty. This is the way I like to trade tops and bottoms. Set up some tests and be sure to let the market prove it's at a top or a bottom first.
Until next week......
Noel Campbell
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