Lately we have been getting a lot of questions about what the market is likely to do. It is a very nervous environment, especially when Bill Gross says the bond market has had its move and he is using equities in his accounts. I wanted to take a look at and discuss a little bit longer-term view of the market than is given by SPYmaster.

Comments in this first picture reflect my view that [apart from the Fed having had its foot to the floor on the money accelerator] the whole bullish move in the market since last spring has been caused by a relatively major head and shoulders reversal pattern as outlined. The distance from the top of the head (March low) to the neckline (orange) at 95 is just shy of 30 SPY points. Counting with that upwards from the neckline takes us to 120 - 125. Counting the same as a % distance on the semi-log chart as shown, the upside potential is to about 130 - 135. These counts never work perfectly as some people would like to have them; so from experience I'm using a range of 120 - 130+ to be the market's probable upside limit from this formation. Please note that 120 was about the level the market was at when the news of the demise of Lehman Brothers surfaced. Many people hang on until they get back to even.