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

Feb.19.09 | About: SPDR S&P (SPY)

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.

Gann Global 021709

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