Capital Ideas & Analysis

Ive sought multiple strategies to find a price target for the end of the current bear market. First off, Head and shoulders, or double top formation. it actually wont matter, we will still come up with similar calculations. the high of 1576 – 1370 = 206. Then 1370 - 206 = 1164. So this will complete the topping out formation. Then using Gann’s price and time calculations, you will take the “bull” market run up with the high 1576 – the low 768 =808. we get a run up of 808 points. Now you need to divide that by two, which is a nominal 50% retracement. so now we take the top, 1576 – 404 = 1172. To further this and use his time measurments, the bull run up lasted 1240 days. this gives us a bear market (continuation) of 620 days or roughly 18 months.  This puts us at an end target date of sometime around Feb 2009. A Fibbinacci retracement would give us 1171 50% retracement and an upward target of 2062. After this we have Fibbinacci fans and archs which gives us 1116, 1216 and 1159 and 1257 respectively. Lastly we have the 1990’s bull market retracement level of 1122. 

So now we have 1172, 1164, 1171, 1159, 1216, 1116, 1122 and an early ‘09 target. Next we will look at the charts. In the past 10 years the 1154-1170 range has been support or resistance 10 times. The Next Fib retracement is 1079 and this range has been suppor/resitance 14 times. Taking the average of the seven price targets we get 1160. Ironically, Goldman Sachs new chief market strategist has a price target of 1160. Thus consensus seems to be around 1160, the most bearish of 1079, and most bullish 1216. With lots of support at these levels i believe this range will be the bottom and will happen sometime in early 2009. Finally, looking at Bespoke’s total return chart, 10-15% lower should give us the bottom that usually forms on an inflation adjusted basis. Thus if we could get 1200 on the S&P 500 we should be looking to buy if we have a long term outlook, for IRA’s and indexing, this should be a place to jump in and get your feet wet. 

Here we go. the picture becomes more and more clear the more you look at research of the cycles. This is Bespoke’s chart of stock market returns non-inflation adjusted. Once again, the bear market started in 2000 and never ended. it didnt start in 07. If we get another 10-15% of downside, it should be considered the buying point to set up for the next bull run. Of course knowing it could be as much as two or three years before we start to “see” this materialize.