Today’s  rally marks the end of this phase of the bear  market.   It is  now possible to  see several  days to a week or so of positive prices in the indexes.  This, however, is not the end of the great bear.  He (or she) is going to take a brief nap to gather his strength for another onslaught.  How can one know this?  The answer is in the pattern  of the market.   According to the Elliott  Wave  Principle, we  have now  completed  a five- wave pattern down since mid-January.  We are beginning a three-wave  pattern  up.   Since the  retracement patterns have fewer waves, they will never completely retrace the more dominant five-wave pattern.  Thus, the trend is still down, with yet another (potentially larger) five-wave pattern down to follow.

Last  week,  I  had  mentioned  that  “in  a couple of  weeks” there might possibly  be a rally.  Let me explain (and possibly correct) my statement.  “Beware the Ides of March!” is very meaningful in the calendar of the stock market.   According  to  The Stock Trader’s Almanac,  we have recorded significant highs  and  lows between March 15th and March 25th over many years.  For example, March 21st is the third anniversary of the all-time high in the  Dow Jones Industrial Index.   March  22nd is the second anniversary of the low marked in 2001.  March 19th is the one-year anniversary of a high point for the market in 2002.  The pattern which seems evident is that  a major “turning point” in the  market  usually  occurs  in  the  next  week or  so. Last week, since the market was going down, I assumed that the downturn would end on or about the 21st. With this new rally developing earlier than anticipated, it’s  now possible that the  turning  point will  be a reversal to the downside.  There is yet another pattern, which also fits.  It’s a 55-day trading pattern where the market changes direction every eleven weeks.  This pattern also comes into play on the 21st.

In the land of the rising sun?

Everyone knows that the Japanese market has been bearish for the past 13 years.  This has been one of the world’s longest stock market declines in  history.   In fact, the Japanese Nikkei index has been  leading  the rest  of  the  world in the  bearish trend.   Now, it seems that it’s bearish pattern may be ending.   It has fully traced out an unusual seven-wave pattern, which ended below 8,000 on the Nikkei index.  The all-time high was  37,000.   Just as this  pattern is ending, the  Wall  Street  Journal put  out  a  story  that  the  Japanese government has announced a stock purchase plan in order to prop up the market.  That’s right!  Leave it to the bureaucrats to bail someone out when it’s past being needed.  So, we’ll be watching this situation very carefully.  We may  make the decision to commit some funds to the Nikkei index once it gets  above  8000 again.  There is a possible target of 14000 within a year or so, so the opportunity looks very inviting.  This looks much like the situation in the 1970’s, when the only market making money was the Japanese Nikkei, while all the other markets were tanking.

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