Presented below is a chart of the S&P 500 Index covering the last 4 years. This chart was first distributed by me at the end of April 2012 as a warning of a possibly severe market correction coming in early May. As it turned, out, this correction is presently underway. Many analyst are now asking how far will this correction go, and how long will it last?
My work indicates this correction could easily proceed into the summer. Reviewing the chart below, you can see that the average correction within the present Presidential Cycle has been about 225 points on the SPX, with the exception of year 2009, likely from the extreme price downdraft and regime change correction the prior year in 2008.
225 points comes to between 15% and 18%, depending on whether you are measuring from 1425 as you would be this year, or measuring from 1200 as you would have in 2010.
This May 2012 market year correction has so far been about 125 points from the yearly highs reached in April. This is about a 9% correction. This indicates a good 7% to 9% more downside may be left in this correction going forward into the summer, and possibly into the fall.
And, if this year turns out to be a Regime Change year, the correction could even be greater, especially if recent Presidential Cycle history has any bearing in the matter ...
Chart: SPX 4 Year Weekly OHLC
Key Coordinate Ascension Vectors in Peach and Peach Spaced
Key Coordinate Descension Vectors in Solid Red
Key Coordinate Bi-Annual Support/Resistance Vectors in Blue and Blue Spaced
Disclosure: I am long SPY. This is a virtual short-term day-trading position