Tuesday, October 25, 2011

2007/8 Analogy Continues To Hold

The analogy with the decline from the 2007 high into 2008 continues with the October 11, 2007 high aligned with the 5/2/2011 high and the March 17, 2008 low aligned with the October 4, 2011 low within +/- 1 day.  So far the rally has matched the 2008 rally with 14 trading days up, although the current rally is stronger.  I was expecting more of a pullback in the middle of the 14 day rally as occurred in 2008, but we did not get it.  However, I suspect we will see the 5-6 day pullback that followed that began today.  If the pattern continues the pullback should bottom by Monday or Tuesday at the latest.  Given the strength of the rally, the pullback may be shorter.  Afterward we should see a 30 TD rally into the first of December at a minimum.

I don't know why this analogy would work except for the current approximately 3.5 year +/- cycle that has been in force for some time.  However, until it breaks down I will presume that the analogy is correct.  The main point to understand about the analogy is that is to the turning dates and not necessarily the form, although so far the form is similar as well.

I am looking to buy this pullback with the view of holding into the December top.

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