A Measured Move

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Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

We have talked about the price and time relationships that have occurred in the stock indices. Simply, the Dow has retraced slightly more than 50 percent of the October 2007 to March 2009 decline where the S&P 500 has fallen just shy. Last week we pointed out that on the 17th of November the half way mark was reached on the basis of time. That means that the length of time spent on the upward move since the March low has come to 50 percent of the amount of time spent from the October 2007 peak to the March 2009 low.

Yesterday on CNBC, Robert Prechter pointed out that basis closing levels yesterday, November 23, was 50 percent in time value measured from the high close to low close. And he added that the Dow Industrials high of yesterday the 23rd reached the price where the first major leg of this rally from the March low to the June high equals the second leg advance from the July correction low to the November 23 high. We calculated this to be a price of 10495.10 for the Dow Industrials and the high registered yesterday shows 10495.60.

Mr. Prechter and others have shown that there has been a divergence in that the Dow was the only major index to post a new high above the November 16 highs. (In the case of the Dow the previous high was Nov. 17). Some analysts will suggest this may be a red flag, but this form of divergence has occurred before during the course of this upswing so time will tell.

We are not recommending buying or selling. We believe though that this is potentially significant information to be aware of as market participants.


Good Trading

Jeff
CB&S