That sound of a bell ringing should concern market investors, traders, and socionomics analysts

There's an old saying that they don't ring a bell when the market reaches a peak. But there are plenty of guideposts and signs that are telling us that the markets have reached a precarious point in time and price. First, this is an important time cycle as discussed by several cycles and analysts we follow here. This time window may be more significant in some of the systems than in others, so I won't get into those details other than to refer readers to the posts that have been made here on those topics. We also saw the S&P 500 test right between the late January and early February high points - not quite to the 881/884 levels I was beginning to expect, but I don't know that the market "has" to get there. Then there's my volatility index analysis using VIX and VXO, and I've posted a few extra times today with updates about that. The VIX did drop some more this afternoon, to 33.68 which is very close to the C=A level I mentioned earlier. The exact level of a C=A symmetry may not be spot on 33.17, depending on the validity of the 47.63 spike on that VIX chart, so we should be alert from today's intraday low. We should also be alert to VIX re-crossing back above the 33.81 Fibonacci .786 retrace level that's more significant because it relates to a larger time frame for the big-picture analysis of the VIX and therefore the equities markets.

Look how the Dow Jones Industrial Average reacted this afternoon as the VIX poked under, and then closed slightly above the 33.81 level (closing at 33.94) (see chart at right). That action might be enough for an intraday reversal, but we'll have to get confirmation in market action Monday and in the following days next week as verification. Volume did increase in the last 15 minutes of the trading day with that last drop that saw the index almost go negative on the day. It retains the possibility of being a very small 4th wave that still gives a small 5th wave high into Monday morning, but at this point I don't want to feel certain about that.

I'm glad I was posting about this significant VIX level here, in real time this afternoon, both here and at my UBTNB3 site! I sure hope that none of my readers missed it!

Speaking of the big picture, how's it looking? There are some big-picture analysts who are saying that if the Dow Jones Industrial Average doesn't manage a close above 8400, and especially if it doesn't manage to do that during this month, April 2009, then we may see another wave down to lower levels in the equities markets. And even the cycles on the Bradley model, for those who are aficionados of that method, might end up being significant this summer - while that model shows a high point indicated for approximately June this summer, the model's cycle dates can be highs or lows. So if you're following Bradley, I would urge you to remember that and not be complacent about the markets merely continuing to higher levels this summer. Might higher levels lie ahead by summer? Sure ... but at this point, I'm seeing the immediate risks being to the downside.

There was also a very interesting article, VIX Premium Forecasts Two More Years for Bear Market, Aligning With Financial Crisis Pattern (naked capitalism, 3/2/09). Even though the market has rallied since shortly after that article, its discussion of the two-year versus 30-day comparison is worth a read.

I'm not saying all this because I look forward to the possibility of the markets going to new lows, but because of the real possibility that these analysts can be correct. Already, we know that the decline in earnings has been steeper and deeper than the U.S. has seen in prior significant downturns, including the market crash in 1987 and the volatility during the 1970's.

Chart of the Day has weighed in with another free-to-the-public snapshot of market metrics. This one issued today compares the S&P 500 equities market performance to recession periods, for the current downtrend and prior downturns. This picture is also very consistent with the warning that the rally we've enjoyed for over a month can still give way to more volatility in coming months:

Chart of the Day
For some perspective into stock market performance during a recessionary period, today's chart illustrates the average performance (since 1945) of the S&P 500 following the beginning of a recession (blue line). For comparison, the chart also presents the performance of the S&P 500 following the beginning of the last recession (which began March 2001 – gold line) and following the current recession (which began December 2007 – red line). As the chart shows, the stock market has tended to decline for several months preceding and six months following the beginning of a recession. Stock market performance following the commencement of the last two recessions has been much more severe than average both in magnitude and duration.


"Webmasters, journalists, and bloggers may post an occasional free Chart of the Day on their website as long as the chart is unedited and full credit is given with a live link to Chart of the Day at http://www.chartoftheday.com."

For now, I'll close with something that may interest students of socionomics - the study of how sociology and economics, particularly market economics, interrelate. Below is a screenshot of Yahoo! News that shows today is a significant day for the types of environmental issues that tend to flourish when society is optimistic enough to be concerned with issues larger than simple survival of the species. (There are also some other headlines indicated that probably relate to a socionomically significant turning point.) If this turns out to be a significant market level that we look back on in coming months and years, then we may also be correlating these headlines with this rally high.