Todays diagram compares the current price path with that of 2007, when the S&P500 peaked at 1465. The market hit bottom 355 trading days later, on March 9, 2009, although the graph ends on the 106th day.
With the blue line representing the proportion of the 2007 top for each days close, and the red line showing the S&P500s ratios of the April 27, 2010 price, the similarity in these two time paths becomes noticeable. On this interpretation prices seem headed for a further, substantial decline. If they fall to the 2007 extent of 81 percent off the top, the near term low target of this cycle falls to about 985 for the S&P500.
And at todays last price for the S&P500 of 1051, thats not very far to go. Yet in last cycle, the drop continued substantially beyond that point. At its low, the S&P traded at 676.53; on March 9, 2009: the price had fallen to 46 percent of its previous high. The comparable drop for the present cycle would be about 560. That disastrous consequence would push prices back to 1995, and lose 15 years of growth.
These projections are only that. No consensus exists on declaring the April 23 high, the current market top. Furthermore, a closer examination of these time paths yields several points of contention; that the two lines do not always move in parallel.
Nevertheless, this analysis reveals the extent of the actual, last cycle and how much further prices could drop should they copycat the latest history.
DJIA -1.32 percent NASDAQ -1.66 percent S&P500 -1.45 percent