If You're Bearish: Time Has Run Out for a Rally

The time has run out for a rally on the S&P 500, according to James Flanagan, head of Gann Global Financial. Flanagan uses a historical database of stock and commodity prices to analyze current moves in prices. His knowledge of market history is unsurpassed and he has been superb in calling the decline in all markets since 2007.

His current database indicates the only historical precedent for the current stock market decline is the 1930 - 1932 time period. And according to all five legs down during that time period, the current market has run out of time and is due for the next leg down. Based on a similar analogy, the S&P 500 could decline to between 420 - 700. The following chart shows the various scenarios from that time period.

According to Flanagan, "If we are to replicate the velocity of the leg down which occurred into the November 21st low, and the 6 legs down during the "great Depression", there is a high probability we are at a breakaway point where the market can move down very quickly."

"If the Stock Market moves higher from here, it will divorce itself from the market geometry of the declines during the Great Depression. As you are aware, I do not expect this to happen although for the sake of America I hope it does," adds Flanagan.

Yes, lets hope it does.

Also see: If You're Bullish: Time for a 70's Party

Comments

[CautiousInv...:]

I'm not sure what significance I attach to this but after cratering 49% in late 1929 off the peak of that year, the market rebounded around 52% and then fell 30% in early 1930 to a level fairly close to that reached in late 1929.

At the time and had there been CNBC, I'm sure we would have been assured that the market was successfully retesting the lows of late 1929. Of course it bottomed in July, 1932 fully 90% off its highs of 1929.

Feb 19 01:15 PM

[CautiousInv...:]

Oops. I forgot to add that what looked like a test of the late 1929 bottom in early 1930 reminds me a bit of where we are today only because of the time spans and the seasonality. I'm slightly bearish but I think this is a different game.

Feb 19 01:23 PM

[PROXIMO:]

"If the Stock Market moves higher from here, it will divorce itself from the market geometry of the declines during the Great Depression." Translation----If the market is moving higher, it isn't moving lower.

Feb 19 03:34 PM

[scotty1560:]

" the market was successfully retesting the lows of late 1929. Of course it bottomed in July, 1932 fully 90% off its highs of 1929."

agree... the timing I can't answer.. all roads are still headed south.
equities... housing... earnings... job losses...

still feel this is only about the halfway point of this mess and we have
40-50% downward in both equities and real estate. High gold prices
and low oil prices are sending loud shock signals of the state of global
economies.

Feb 20 12:40 AM

[ChipSeal:]

dshort.com/charts/bear...

The above link compares four bears. Please note that the GD chart is of the DOW and the others are of the S&P 500. The time frame is days of trading from the previous high. It was brought up to date yesterday.

Feb 20 08:55 AM

[kelm:]

Either short or stay on the sidelines. Since the fall this market has shown no convincing strength at all. It has a lot lower to go. When it does we will get the second round of defaults and business failures. There have got to be many companies hanging on by their teeth. I'd expect more ponzi schemes to surface as well.

Feb 20 11:47 AM