Strange Similarities Between 2007 Peak and Current Rally High

cougar

Mar 22, 2010: 9:48 PM CST

In another “Hmm, That’s Interesting” post regarding prior market historical pattern, there is an eerie similarity in the rally that ended with the market peak in 2007 and the current rally into 2010.  Thanks to a blog reader for pointing out this comparison to me.

Let’s take a look at the S&P 500 and Dow Jones Indexes on their daily chart from the peak in October 2007 to present.

First, the “Then” Charts of the S&P 500 and Dow Jones:

Dow Jones:

This post will be more ‘pictoral’ than text-based, but the main idea is to look at the two charts above showing the exact market peak in October 2007 - it’s a snapshot in time.

Both charts are showing a negative momentum (3/10 Oscillator) and Volume divergence as price rallied one final time above the moving averages that crossed bearishly… as price rallied to a new high in October.

I’ll let the charts speak for themselves above.  Remember that you are looking at the exact peak in the market in 2007.

Now, we move to the present day (March 22, 2010) S&P 500 and Dow Jones:

Dow Jones Current:

And what do we see that is similar with both times?

• Sharp, almost relentless rally into initial peak
• Sharp downside sell-off (and volume spike during sell-off)
• Negative (bearish) EMA Cross-over (sell-signal)
• Positive 3/10 Momentum Divergence on the “ABC” Low
• Non-Stop Rally to new high that breaks above 20 and 50 EMAs
• Negative Volume and Momentum Divergence on the new high

And as of today, that is where the comparisons stop.

The question is - “Will the market of 2010 continue following in the footsteps of 2007?”

If so, then we are looking at a market top right here.

However, we’ll know that the curse… or pattern… (history) is broken should the market continue rising, or even make a slight pullback to support and break to new highs.

Unless we see the market pullback and then move to new highs… or start to see momentum and volume pick back up bullishly… then we need to be aware of the potential for history to repeat, and those who have not learned the lessons to be doomed to repeat them.

For now, this is filed under “Hmm, that’s interesting” but if we start selling off sharply, we’ll know price is following the historical pathway which should uncover a (not so bullish) future.

ranchgirl

Someone has posted this yesterday

befriend

Thanks.

newyorker

today , we shoot higher, so it might have been invalidated

jack3400

rongh

The pattern looks interesting. I think now the top is near or already past. If it is not near, then the top will be around this Friday.

However, the internal strength of the market is different in the two time frames.

globe