THE RULE OF THIRDS APPLIED TO THE DOW GOING BACK 100 YEARS
The Dow has essentially been in a 100 year plus uptrend. Marking the ascent of the United States and western civilization as a whole.
Dow 100 Years
It hasn't been a steady climb, however. There have been periods of volatility, decline, and mania. The fundamental human emotions of fear and greed have insured that periods of drunken shaking and wiggling, immediately follow periods of prosperity and consistency.
Over the past 100 years there have been three different periods when the Dow stopped its normal trend of moving up and instead paused for an extended period of drunken, obnoxious behavior:
1929-1954 - the effects of the Great Depression lingered for 25 years, until the Dow managed to break into new highs and not look back. Liquidity measures and frankly, cheating in order to force the markets higher didn't exist back then. But this lengthy period of pain guaranteed us that cheating or as we call it today, aggressive monetary policy, would shorten these periods of pain, thereby putting us back on track for growth and prosperity, marked by an uptrending Dow Jones average.
1929-1954 consolidation
1966-1982 - The second lengthy period of consolidation, marked by a period of nationwide shrugging of shoulders, excessive drug use and subsequently, interesting fashion choices...came from the period of 1966-1982. But get this...this time around, using the lessons we learned from the 25 years of consolidation in the Dow that was 1929-1954...we managed to cut the period of time we consolidated by a third...16 years, instead of 25.
1966-1982 consolidation
2000 - present - Finally, we have the current period of consolidation, marked by a stunning rise in technological innovation, which has led to most human beings staring down at their phones more than they look up. I am convinced that this phenomenon will lead evolutionary forces to create another set of eyes on top of our heads so that we can text, twitter, facebook and check email at the same time we drive and walk. Anyways, I'm getting off the subject here...oh yeah...the consolidation that we have faced from 2000- present.
As we have faced the challenges of an imploding technology bubble, an imploding real estate bubble, a historic shift in the global economic landscape and a wonderfully creative global central bank cabal that has managed to reinvent itself as the messiah to all institutions of capitalism that experience pain...we have gone into a volatile period of 11 years doing nothing but carving out notches in this sloppy trading range.
Dow 2000 - present consolidation
Using the rule of thirds, as applied to finance...we find that in order to cut the previous consolidation period of 16 years by a third, we get an 11 year period of consolidation.
Therefore, we can surmise that 2011 or thereabouts...will be the final year of consolidation for the averages, as a new bull market will emerge.
While the rule of thirds for finance may seem far-fetched, and it just might be. The point I am trying to illustrate is that due to: 1. lessons of the past 2. more aggressive monetary policy 3. advances in technology that allow information to be absorbed faster, thereby reacting to and adjusting inefficiencies more quickly...we should expect to see these periods of consolidation, bear markets or whatever you want to label them as, get shorter in length and not longer. The past 100 years illustrate this phenomenon very well.
Our current period of consolidation is very close to fading into the past. The sample size to determine whether the rule of thirds is legitimate or not is nowhere near adequate...and probably won't ever be. So if we do end up shooting up to new highs and never looking back after 2011...I will quietly remain confident that it had everything to do with my rule of thirds...and nothing else. Smile 
Later I will be presenting more reasons why I believe we are entering a period where the bulls will run harder than anyone is currently suspecting.
