The broader markets have rallied quite a bit since June 2012. Of course those following this blog were able to stay ahead and profit from all of it. Now we are coming into overbought territory and have to talk about getting defensive.
The top chart above (weekly S+P 500) shows each new bull market high pt was made exactly 52 pts above the previous highs, which yields about 1582 or so. Below shows 3 equal sized corrections in this bull market campaign, which produced 207-260 pt following rallies. We can then expect at least 1551.12 as upside target + reversal spots.
The bottom of the two charts above (monthly S+P) shows 2007 bull market high pt within reach, and a trend line connecting the 2000 and 2007 bull market highs coming in just under 1600 as of right now. All this lines up as confluence for where the market will eventually top out.
Conclusions: We should be expecting a correction in the near future, somewhere in the vicinity of this above zone I laid out. My forecasting model is predicting an 18% drop in the S+P, though for simplicity I’m sticking with a 15-20% correction range.