There's nothing like a big stock market rally to remind you that things are, in fact, really bad. Mary Ann Bartels, head of U.S. technical analysis, believes that the recent rallies off the August and October lows look a lot like the rallies off the lows in January and March, 2008. Needless to say, those weren't long-lasting rallies: After the S&P 500 rallied 12 per cent in March and April, it then sank more than 50 per cent by March, 2009.
She explains: "In June 2008, the S&P 500 broke below the 50-day moving average (ma) and this preceded a move to new lows. Last Monday's break below the 50-day ma near 1207 points to a repeat of the 2008 pattern and targets a move down to 1150-1100 with the risk of the October low of 1074 being tested. Resistance is near 1200-1230. We believe this sell-off could carry over into 1Q12. Then we are looking for a completed base or consolidation pattern which could take place in 1Q12 with a recovery taking place in 2Q12 where new beginnings for the market may emerge. We think patience is a virtue in this market."
David Berman