The high optimism spreading through the financial world following the strong recovery of the last six days yields headlines such as Is the ‘correction’ over? in today’s Yahoo. That is why we repeat our caution flag of a few days ago. Remember prices did not collapse immediately after the last two bull market topped off.
Today’s diagram plots the S&P500’s closing prices twenty days before through 35 days after market tops. It reveals prices moving higher soon after these earlier bull markets ended. Moreover, even after these prices turned down- 20 to 21 days –after their highs, the market moved sharply higher.
Focusing on this history, and the paradigm that history tends to repeat itself, could prevent undue optimism and projections that this bull market will move prices to even greater heights before too long
DJIA -.19 percent
NASDAQ .24 percent
S&P500 -.03 percent
