In late February 2009, I stuck my neck out and called for a massive bull market in stocks. I based my prediction on two things:

1. Elliott Wave patterns I identified as bottoming.

2. The off-the-charts bearish sentiment gauges, which had not been that negative since the 2002 lows. 

The retracement of the S&P 500 over the eight odd years was a textbook Elliott Wave pattern, and frankly, I think I was the only person who noticed the significance of the 666 low as it related to the 1974 S&P 500 lows to 1999/2000 highs.

Why was that 666 number so significant and a key indicator of a major bear market cycle low? Well, it marked a clear Wave 2 Elliott Wave bottom in price, sentiment and time all at once.

Believe it or not, at that level, the S&P 500 had made an exact 61.8% Fibonacci retracement of the 1974 lows to the 1999 highs. That was very significant in that the market bottomed right there, and then began rallying upward. At that point, it confirmed what I predicted in February 2009 — that we would begin a massive bull market. 

The correction from the 1999-2000 highs lasted about eight Fibonacci years, and retraced 61% (Fibonacci’s golden ratio) of the 25-year advance. Everyone was bearish at the lows, which again, was a confirming piece of evidence to get long in the winter of 2009.

That brings us to this new bull market in October 2010. Clearly, we bottomed in March 2009 at 666, but it was not random at all.

We are now in the early stages of a big Wave 3 up in the markets. Wave 1 ended in April 2010 (a 5-wave structure completes a large Wave 1 pattern). 

Then, Wave 2 corrected in A B C fashion, which had a 38% Fibonacci retracement of the prior 13-month rally. That completed Wave 2 down into July 1, and sentiment again was horrible at the recent 1,040 pivot.

Now, a Wave 3 structure (5 total waves) to the upside begins at 1,010 on July 1 with a move to 1,130, then a Wave 2 to 1,040, and now a Wave 3 up still in progress to 1,220 if I’m right. 

The bottom line is the long-term trends are bullish until the wave patterns materially change. Once 1,220 is hit, we likely get a pullback Wave 4 down, then a fifth wave up to new highs past the April 2010 highs.

Below is the simplest of SPDR S&P 500 (NYSE: SPY) charts with some basic Elliott Wave labels.

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