This is the fourth and last in this series of blog posts that analyze the trending nature of the S&P 500 on four different timeframes.  See the previous posts.  This one is of the Very Long Term, which is viewed on quarterly bars.

Charting

As we get into very long term timeframes, hitherto unseen distortions come into the Midas curves, both the S/R curves and the TB-Fs, due to the huge monotonic increase in trading volume that appears over the decades.  I’m devoting a whole chapter to this in our forthcoming book, so I’m not going to repeat it all here.  I’ll just state and demonstrate the result, which is that we have to go back to traditional time based charts, and we need to calculate the Midas curves with no volume.  This chart is of quarterly bars, time based, from 1968 to the present, with price on a log scale.

The Baby Boomers’ Bull Market et Sequa

The huge secular bull market that is associated with the baby boomer generation started in 1982 with a steeply accelerated uptrend, so S1 is started from there.  The TopFinder, which is fit to the latest pullback, the Asian currency crisis of 1998, exactly called the top in 2000.  After price crashed to about the 50% retracement level in 2002, it went back up, tested the 2000 high, and rolled down again.

The Post-2002 Behavior

Retrospectively, I have fit that dotted green Midas S curve to the 2002 low as a test of subsequent action.  If, during the decline of the last two years, price had supported and turned up from that curve, that would’ve supported the concept that a new uptrend started in 2002.  However, price broke straight through that level, went on down and turned around exactly at S1, which is a major, very significant support curve.

There certainly was a lot of angst among market participants in early 2009.  But on March 6th, price abruptly stopped declining and turned up. . . right at S1.  Anyone who was watching THIS chart at this time would’ve been very pleased, and during the following weeks probably would’ve piled into the long side of the market big time.  I’m chagrined to have to admit that I was not watching this chart then, and thus missed this huge opportunity.  One of the main reasons I’m now doing these blog posts is to force myself to pay better attention in the future!

To help understand what’s going on now in this timeframe, look at the upper pane, the standard RSI indicator.  The RSI has the unique property that trendline analysis can often be profitably applied directly to the indicator itself, as I’ve done with that trendline from the 1974 low to the 2000 high.  That trendline tracked this monstrous bull market from the depths of the mid ’70s recession until it broke at the manic dot com peak.  Now, in recent years, the RSI is behaving as a classic oscillator, not a trend indicator, going from somewhat overbought in 2007 to somewhat oversold in 2009, and now rising from there.

Combining the RSI’s behavior with the actual price moves, what I’m seeing here is that price is stuck in a very wide trading range between the 2000 high on the top and S1 on the bottom.  On this timeframe, there currently is no trend.  There won’t be a new trend until price breaks out of this range.

Longer Timeframes?

This is the end of my four-part series of blog entries.  There actually could be a fifth part, the analysis of the next longer timeframe, which I call the Mulit-Generational Timeframe, using both quarterly and yearly price bars, and going back well over a hundred years.  I’m doing that analysis in our forthcoming book.  For now, I’ll just give you a very brief statement of the conclusion of that analysis:  We’re now in a huge bear market that will last at least another ten years.

Summary – The Trending Status of the S&P 500

Short Term                      Down
Intermediate Term           Down
Long Term                       Up
Very Long Term               No Trend – in a trading range
Mulit-Generational           Down.

Updates

I’ll update these analyses here on this blog on the following schedule:  Short Term every week, Intermediate Term every 2 or 3 weeks, Long Term every 2 or 3 months, and Very Long Term once or twice a year.  And Multi-Generational?  Maybe once more in my lifetime!

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