LET’S LOOK AT THE DOW JONES 1928 THROUGH 1950

We are going to compare this time period with the current NASDAQ charts so please remember this chart.

The index had a 34 month decline to end the bear campaign in 1932.  This was followed by a 56 month run or 4 months less than the 5 year cycle.  That high also coincided with a 90 month cycle from high.  The move down into the 1938 low was 1 year 22 calendar days.  From the 1937 high the index ran out a 5 year bear cycle and that is my forecast for this time period.  If we follow this roadmap I have noted where within this time period we are currently located.

NOW LET’S LOOK AT THE CURRENT NASDAQ MONTHLY CHART  

The NASDAQ decline was 31 months versus the DOW at 34.  The subsequent rally was 56 months in the Dow while it was exactly 60 months in the NASDAQ thus going high to high in 90 versus 91 months.  The decline from the 90 month high into the 1938 low was 1 yr 22 days and the decline into the NASDAQ low in November 2008 was also exactly 1 yr 22 calendar days.  The retracement into the 2007 high and the retracement into the 1937 high was the exact same amount.

If we follow the same retracement as 1938 the objective for the NASDAQ is 2266 or another 250 points. 

The timing for this current rally I’m still not completely confident but I can say November should bring in an important low.  The high for this leg up could be now through first week in September.  I should be able to narrow that time window to a week. Keep in mind there will be a few weeks of distribution at the top.

So according to this analysis the index is now in a bear cycle of 5 years.  The next 5 years should resemble the 1937 through 1942 roadmap for the NASDAQ and similar for the other US Stock Indexes. 

We’ll look a little closer at the 5 year cycle and the “Time” for a top in two weeks when I’m back on Squawk Box. I’ve posted these charts on my website so you can get a copy.

Yes, yesterday looked a bit exhaustive and the big gap up will likely need to be consolidated next week with a small move down or further sideways movement.  If there is no downside follow through from yesterday then the daily chart will continue in the exhaustion style of trend.