Couple observations:
(1) A minor cycle date is 06/30/10. When time is “up”, price tends to reverse in the opposite direction. Minor cycle dates are not as influential as major cycle dates.
(2) The energy of the decline, contrary to the hype, is weakening rather than strengthening. This can viewed from the S&P 500 with exchange volume chart. The flash crash (5/6) low was created 2.57 billion (B) shares. This low has been tested three times on 1.9 B, 1.64 B, and 1.6 B shares. This suggests waning downside energy.
(3) Many technicians suggest that there’s no such thing as triple bottom. If that is case, then I am not certain what to call the setup in 2002-2003. See chart below.
S&P 500 with exchange volume:
S&P 500 2002-2003
Does any of this suggest that I am bullish on equities? No. Gold continues to outperform equities by a wide margin and remains the better devaluation hedge.
What might come as a surprise to the bears is how equities perform as devaluation hedge despite putrid business conditions. For example, while many predict Dow 5,000 and gold $2,000, history suggests that Dow 12,000 (or higher) and gold $5,000 (or higher) is more likely under a fiat currency system.
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