Actually that’s just your faithful correspondent making funny –what else can you do about the Dow? Well, you could break down and cry, but then you might miss the breakout for the tears. However there is some semse to made of the Dow pattern. First of all, surprise, it is a sideways trend with a downward bias. This is big news to our readers, we’re sure. So what do you do in a sideways trend? Hold on to your positions if you’re short the trend. Make no new commitments (except as hedges, bottom fishing or buying lottery tickets, OR picking up stocks unjustly devalued on which you have expert or insider knowledge). Or trade — as in buy the bottoms of the ranges and sell the tops. Buy weakness, sell strength.
At least the ranges are clear here. And there are ranges within ranges. The immediate range is between 9098 and 7862. The broader range is between 9794 and 7449. And nota bene, amazingly there is not a single day away from the two day range of the panic and bounce day of October. In this respect the market mirrors the basic economic situation. Everyone is hanging by their teeth (or toes) watching to see if Obama’s program will stop the ship from sinking. We would not be surprised by sideways markets for months.
The transportation average, I believe, has already confirmed the bear market, fulfilling one of the criteria for a continuation of the bear trend. Given the volume pattern on the industrials, it would seem probable that it will also confirm the bear trend soon too. Do you agree?
I don’t like getting egg on my face by predicting. Usually it is safe to say (and true) that the present trend will continue. I think this letter is absolutely right on. That’s my story and I’m sticking to it.
Today I’ll post a letter on gold and DBA. I think the bear trend has a good chance of continuing, but that’s thinking, not analyzing.