Thinking that the S&P 500 is on a downward path to 600, and Dow about 6000? You're in good company

My readers will be very interested in a big-picture analysis of the S&P 500 by Sand Spring Advisors LLC at http://www.sandspring.com/charts2009/cdj101709.html. Why? For one thing, it's got a very long-term trendline analysis showing that the S&P 500 could descend to the 600-650 level by late 2011 and still just test that trendline at that time. It's also got some interesting discussion about Fibonacci time analysis, and "phi" dates, supporting this point of view. It seems you'd have to subscribe to get more details - that's up to you of course; I'm not a subscriber and cannot speak to that. I just ran across this article tonight whilst browsing Safe Haven. Below, I'll discuss more about why I like the big-picture view this article presents. First, I want to add that they also host and cite to Martin Armstrong's October 13 newsletter with in-depth and historical analysis about cycles. So, Martin Armstrong's October 13 newsletter can be seen at http://www.sandspring.com/graphs06/huygens.pdf.

And here's a quote from this article at Sand Spring, which was written October 16:

No one expects markets to crash right now. I see that path as oddly possible, albeit if my previously discussed 1938 analog were to hold, markets may easily just begin lower with a step and a stumble in late 2009, and only accelerate lower after one more rally attempt into January 2010 (equivalent to late 1938 to early 1939).

Let me tell you that the idea of a step and stumble in late 2009, then a rally effort into early 2010, fits not only with the idea of the drop from 10/21/09 having its first wave down, then a large second wave up into early 2010, then its third wave down and so on. It even fits with the Benner-Fibonacci cycle I showed some weeks ago (use the "Cycles (other)" label to locate it) that would point to a significant high in 2010, then down. And it even fits with the cycles on the Bradley siderograph model - we saw a high on the 10/22/09 turn date ... and if you looked at the new free version of the Bradley model that I posted the link for recently at my UBTNB3 blog (link at right - the reference was to Manfred Zimmel's Amanita site/newsletter) ... it even fits with that Bradley chart showing a rally into early 2010, then a sharp drop afterward.

One reason why I like their view is that I consider it to fit well with my personal favorite view for how the SPX will probably move. Without quibbling over how to count the waves down from October 2007, I like the SPX 600-650 level as an Elliott Wave and Fibonacci-based target for the SPX (especially if the whole drop is the large "C" wave of an ABC "flat" that started in 2000). SPX 658 is a .618 retracement back to the 1982 low. The 600 level in the SPX also looks like an Elliott Wave target based on that level having been a possible wave 2 of a possible extended fifth wave move when the equities markets accelerated higher during the late 1990's. The 658 level is among the Fibonacci targets I've been showing for almost a year now, on my monthly SPX chart (below). If the 600-658 level ultimately wouldn't hold, then there are lower targets for the move down.

So I'm going to consider all this as further support for the potential forecast of the weakness generally continuing into November, followed by a rally into January or so (need to look at that Bradley chart again), drop afterward, and if we're really lucky, a large 4th starting late 2010 and then diagonal 5th during 2011. Personally I won't get wedded to the idea about the low happening in late 2011. For that matter, if that's to be the timing, then it could support a diagonal pattern that draws out for the entire move down that started about 10 days ago - will see! But that's not so likely if this drop isn't going to be the "last wave" of the entire bear market correction. On the big picture, we may still be debating whether there's still another large Wave V (supercycle) to go, or merely something like a large B wave. For now, let's stay focused on what's ahead for the coming days, weeks and months.