Monday, September 12, 2011

Meridian Market Theory - Update

Since floating the Meridian Market Theory in late March - the market has respected the meridian and was subsequently strongly rejected by it. To simply discount this chart as novel and cute in light of the recent market swoon - would be ignoring historical precedent and a possible outline for what lies ahead. 

I find it quite interesting that from a structural (price) perspective, the previous two trading environments (1994 and 1987) where the market was rejected by the meridian are quite similar to our current structure. Namely, there was a waterfall decline - followed by a trading range that initially appeared as a bearish continuation pattern - but was in fact just a consolidation before the market returned to the primary trend. 

With the daily comparisons to 2008, it should be noted that the primary difference today - from a structural perspective - is the equity markets were working towards resistance - not support. This gives credibility towards my suspicion that once the markets works through the many issues in Europe - the primary uptrend will resume. 

Further reading: