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CNBC ON DIGG

Correction Coming in this 70s Retro Rally: Charts

Published: Friday, 6 Nov 2009 | 6:40 AM ET

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By: Kirsten Bennett, Special to CNBC.com

The current market rally will stop in the next few days, a correction of at least 3 weeks will follow, but stocks will rebound and finish high in 2010, independent trader Bill McLaren said Friday.

Once this correction has finished, it “will be followed by a strong trend up to complete in 2010 for a significant top,” Mclaren told CNBC.

The current recovery outlook for the S&P 500 index mirrors that of the Dow in 1975, McLaren said, adding that the “index has been following this roadmap very well.”

The crisis of ’75 was “the last time that there was a dominate five-year bear cycle which we’re in right now,” he said, adding that “we can expect the same type of trend that occurred in '75-'78 to occur from now to 2012.”

If the recovery does not follow this trend and the rally holds, “the other short-term alternative is that the market just goes into a sideways move,” McLaren added, saying that if this is the case, the S&P 500 could test 1,120, and then correct from there.

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