Jul 13 - Analogs in Time
Since many major lows occur in years ending in 2, the rally from the 2002 lows shares similarities with many previous ones from the lows in 1932, 1942, 1962 and 1982, almost every 20 years on queue. Since this rally has now lasted 57 months from the Oct 02 low, we can rule out the 1942 and 1962 rallies which lasted 49 and 44 months respectively. The 1932 to 1937 rally lasted 56 months and the 1982 to 1987 rally lasted 60 months but ended in a crash. We are now 5 months past the average duration of 52 months for this type of rally and we should be aware that it could end at anytime this year and possibly abruptly should it extend too far like in 1982 to 1987. One must also take note that all of these rallies failed to make new highs until the next decade, except for the 1982 to 1987 one which barely made new highs late in 1989. This means that there is a high probability that the US markets will not beat the 2007 or early 2008 highs until 2009 and probably later.

1982 to 1987 rally - Best case scenario
The current rally fits best with the 1982 to 1987 rally by starting the comparison from the March 2003 low, but that suggests a final high in early 2008, which would make it 66 months from the October 2002 low and the longest on record yet, but in the markets everything is possible.

Charts courtesy of StockCharts.com

Charts courtesy of StockCharts.com

1982 to 1987 rally - Worst case scenario
While it is possible this rally will continue until early 2008 and be the longest ever, it is wise to also compare this rally with the last two years of the 1987 rally to see if they share similarities and apparently they do.

Charts courtesy of StockCharts.com

Charts courtesy of StockCharts.com

LTCM bailout in 1998 and subprime today - Medium case scenario
The parallels with Summer 1998 are not only evident in the news, and we should watch carefully what unfolds in the next months.

Charts courtesy of StockCharts.com

Charts courtesy of StockCharts.com

1932, 1942 and 1937 rallies