Yesterday I noticed that the 1938 rally ended with a 1/4 extension of the rally from the initial low to a major high at about 120 days.
Not a lot happened in terms of points gained in the first 60 days of the '38 rally which was very different to our current circumstance. That is something to keep in mind if you read on.
The initial low in '38 was at price 97.46 on 31 March.
There was then a higher low at 57 days from low which was 0.01 of an index point off an exact 61.8% retracement of the first burst up from low to high at 18 days (price 121).
Then followed a very strong 60 day rally from the higher low to a significant high at 117 days on 25 July. The price of that high was 146.31.
A 1/4 extension of the whole 117 day rally to that point is worked out as follows:
(146.31 - 97.46) / 4 + 146.31 = 158.52
There was then a grinding 65 day pull back into a low at 182 days from high. The price of that low was 127.85. An exact 3/8th retracement of the rally March to July was 127.99. All very orderly.
The index then rallied for 44 days into the high for the whole move at 224 days on 10 November. The price of that high was 158.9.
So the 1/4 extension to end the move was from the low that began the rally to the high at 117 days.
A comparison with 2009 is difficult here as we had a high at 97 days from low (11 June), a low at 124 days (8 July) and a high at 154 days (7 August).
A 1/4 extension of the rally to June is 1028 and history.
A 1/4 extension of the rally to 7 August is 1105 and could be the mark. We can do 50 point in a few days. The qualifier is that it's an extension from a high at 154 days vis a vis 117 days in '38. Interesting.
And finally, the rally from the low on 8 July (869.32) to the high on 7 August (1018) was 148.68 points and a 1/4 extension of that rally is 1055.17.
Last nights high was 1056.04.
Could that end the rally? I don't know but it is something to keep in mind.
We are only at 193 days from low for the S&P and 190 days for the NASDAQ and Dow so time is against that being a high based on the '38 comparison alone.
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Next I will try to analyse how the DJIA traded into the high in '38 and see if any clues can be extraced from that as to how a high may arrive in the here and now.
By the way, last night's close (1052.61) was below the 1053.5 level I keep rabbiting on about.
I was a bit surprised what with all the resistance around here there wasn't a more significant reaction to the downside. Kind of reminds me a bit of those Road Runner cartoons where the Coyote would open an umbrella above his head and stand there hoping as a huge rock came hurtling down from a great height directly above. Of course the umbrella didn't stop the rock, but the ground eventually did. Now where is the ground at?
(20min delay)