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What is the pattern here? Advance, prolonged consolidation, failure to move through resistance, dramatic decline at the failure of expectations or dramatic advance at the successful test — a familiar theme. Note the form of the activity from the October 1987 low. While not an exact repetition of the prior bull campaign, the general characteristics are similar: Initial strong advance into the February 1988 high, sharp reversal into the August 1988 low, two minor advancing swings, sharp advance on the breakout and final top made on an outside reversal month of August 1989. The only real difference of the October 1987 - August 1989 bull campaign from the monthly chart perspective is that the market did not undergo the prolonged consolidation periods at each important resistance level prior to a countertrend move or trend breakout.

If we examine the activity from the weekly chart perspective, we see that there really was little difference between the form and pattern of the 1981 to 1986 bull campaign and the 1987 to 1989 bull campaign (Figure 2). From the February 5, 1988, swing high, the market consolidated at high levels for four weeks, making two more weekly attempts at the high but falling short of that high and closing each week below midrange, a sign of weakness. The capitulation came when the market made a strong decline below the minor swing low, closing near the low of the week. From the corrective low of August 16, 1988, the market made two minor advancing swings, the weeks of 11/1/88 and 1/27/89. The second advancing swing only slightly exceeded the resistance of the first on an intraweek basis.

The third attempt at this resistance level was made the week of May 19, 1989, on a strong break of the double top with a close above the resistance swing highs and near the high of the week. Following this breakout of important resistance, the market accelerated the advance in the same manner as the breakout in November 1985 (Figure 1) following two minor advancing swings. A new high for this bull swing was made August 1, 1989, on a very wide range reversal week with a close at the low of the weekly range. The ensuing price activity should look familiar, as it underwent the same general form as the activity after the April 1986 top.