text: If you follow the link above, you'll see a stunning chart of some of EWI's gold and silver forecasts over the past three years. When a market's wave patterns are clear, as they are now in gold and silver, it is a remarkable sight. See the chart now.
  May 24, 2013 in U.S. Stock Market | Permalink | Comments (0)
  U.S. Stock Market Patterns Tend to Repeat Themselves
  The scope of U.S. stocks' record run has surprised almost everyone in the investing world, bull and bear alike. That includes technical analysts who track every twitch in the broad-market gauges, trying to transform historical price and volume data into a clear picture of future stock moves.
  The 6,000-point rally in the Dow Jones Industrial Average over the past four-plus years has made many believers among technical analysts. "When you're in brand-new territory, it's difficult to say what will be resistance," said Jay Lefkowicz, technical strategist at New York brokerage firm Concept Capital Markets, referring to where the rally will stall. "There are people involved, so it's not always an efficient market."
  Technical analysts employ different tools to try to unfurl that and other mysteries.
  Walter Zimmerman, chief technical analyst at New Jersey brokerage United-ICAP, leans on the Elliott Wave Theory, formulated by Ralph Nelson Elliott during the Great Depression. It is based on the belief that crowd behavior tends to follow quantifiable cycles and patterns.
  The theory leans heavily on the Fibonacci sequence, which is a mathematical pattern of progression based on the ratio of 1.618 that has been used to describe natural phenomenon, such as the breeding pattern of rabbits and human body proportions.
  Based on his interpretation of different Elliott Wave cycles and recurring technical patterns, Mr. Zimmerman sees multiple potential resistance levels for the S&P 500 between 1750 and 1790. That would mean gains of at least another 4% for stocks from Wednesday's midday levels.
  He adds a caveat. "We're not trying to outsmart the market by picking the top." The price objectives are only intended to be levels where "we should be watching the market extra closely," Mr. Zimmerman said.
  That said, all the forecasts are apt to be fallible for a familiar reason.
  "The reason some patterns tend to repeat themselves, is the one thing that all markets at all times always share: human nature," Mr. Zimmerman said.