It's been a few months since I haven't updated on the Secular Bear market we are in. I think it's time we take a step back and take a quick look at the forest. In this previous post on Secular Bear Markets and their aftermath that I posted in late March 2010 (one month before the top at SPY $122) I drew a long term chart of the SPY showing that we were at the end of the green phase (A) and that we were about to enter the purple phase (B). You must Click Here to see what I mean !!!
Since most of you have absolutely no clue where we could be headed in the next few months, I think that this post could help you out.
I believe that the purple phase will end near SPY $91... in about 6 months time.
As you can see on the chart below The first pink phase gave up 56.70%, the Green phase rallied 79%. I suspect that the purple phase will decline 25%.
What's even more compelling here is that if the market falls and fills that gap near SPY $91 it would perfectly match the 25% decline off the April 2010 highs. SPY 122 down to SPY 91 is nearly 25% decline.
Finally I'd like to add these two bonus charts. September is supposed to be the worst month for stocks. We all know how this year went.
Take a look at how september went in 2007 and how the next few months turned out to be.
Now take a quick look at September 2010 and ask yourself how the next few months would be like ?