In our latest post back in January 2011 we have posted: “ The time is ticking away for World Indices to correct for a medium term correction in a possible longer-term trend. The market is not likely to start its medium term correction before mid April – mid May 2011. There is a confluence of cycles coming together at that point in time that will cause the market likely to correct between 10-20%. It is still unclear of this will be a steep and quick correction or that this will take more than several months”.
We are now very close to the probable time and price target mentioned in our previous article for a medium term crest to occur. So let’s have a look where we are right now and what other information could confirm this as well.
In the current market position as seen in the S&P500 and many other world indices we are now approaching a significant crossing. According to Gann you should watch 7 years from any important bottom or top. You will find many culminations around the 42nd month. We are now approaching the 42 month measured from the top in 2007. We are also drawn to an important Gann angle that could cause quite some resistance to cross.
This juncture has Fibonacci relationships of quite some significance as well and a first leg of a 4 year cycle is unfolding in a top as well. Decision points in stock markets are often seen at these points in time and price. Will this juncture be the end of the current bull market?
An important Fibonacci & Gann juncture
Decision points in Stock markets are often seen at Fibonacci related junctures in time and price and/or on Gann angles. The stock market is now approaching such a juncture and could possibly unfold end of April – end of May 2011.
SP500_April1111
Between the high of 2007, the low of 2009 and the high of 2011 a symmetrical triangle is formed of which each side is 1.618 times the other sides, measured in months. Notice the third leg from mid 2010 has a 0.618 Fibonacci relation with the first leg from the bottom in 2009 to mid 2010 measured in price as well. Be aware that the number 42 is a double Fibonacci number ’21′, the same applies to the number 16 (double ’8′) and the number 26 (double ’13′).
The possible crest around end of April 2011 also lies on an important Gann angle, connecting the bottom of 1987 with the expected heights in end of April/end of May 2011.
Likely price target for the S&P500 at that point in time is 1352 +- 20 points. We have reached that target window already a few days ago. However, the expected deviation for this likely top to be forming is +-1month as seen from end of April 2011. It all depends if you connect the lowest low, or the lowest close, or the highest close or the highest high with each other, if the trough or crest is formed in this month or the next/previous month.
The 4 year cycle high
The above mentioned point in time coincides now also with a first leg of 4 year cycle (see the chart in our previous article) unfolding in a crest. See update below.
SP500_2_April1111
We have now arrived at the projected time and price we forecasted on January 26th 2011. I would be very cautious now. The market can become very volatile shortly afterwards. If you study at what happened each 4 years ago from now, you will notice many similarities with the current market conditions. If past cycle behaviour repeats itself, the 4 year stock market cycle could still bring us later on to higher heights, somewhere between October 2011 and March 2012.
Do take care, the volatility will likely be high at the end and/or beginning of a 4 year cycle!
Conclusion
We are approaching an important decision point in the stock market. This could also be a final crest in the current bull market but not necessarily. It is too early to call. It is still indecisive if this bull market is on its last leg. Be aware, the probabilities of past 4 year cycles behaviour shows that a downturn is likely to occur at this juncture for some time after which we could continue into new heights to culminate in a final crest for this bull market somewhere between October 2011 and March 2012. We will come back to that later on.
A good measure if the bull market is over is the 21 month moving average. As long as we stay above the 21 month moving average we likely remain in the current bull market. If we close below the 21 month moving average the odds are very high we have started a new bear market. For the S&P500 the 21 month moving average is currently at approx. 1152 in price.
For now we will definately experience quite some resistance and a mid-term turning point any time from now and end of May 2011 with a likely price target of 1352 on the S&P500 +-20 points. Notice we have arrived at that time and price window. So, I would treat this stock market very carefully.
We will post more analysis as the market develops in the next few weeks. Take care and stay tuned.
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