Big doings in the Dow (and the market)

100122indu3 — 572.25 — 5.33 — 50

Three days.  572.25 points.  5.33%.  Closed below the 50 day low.  50 day.

Technicians who know about systems know about the famous Turtle System, which is a variant of the Donchian high/low breakout system.  In this system, to radically over simplify,  the trader buys on a break of the 20 day high and sells on a break of the 20 day low.

Needless to say the break of a 50 day low appears significant.  As our readers will note we were hedging and lightening up early in this wave.  This is no guarantee that this downwave will continue, but the momentum is startling.

Also of significance is what is called the false signal phenomenon.  When the market generates a signal that shortly is reversed the second signal has special significance.  In this case the break out of the rectangle to new highs was a buy signal, which has now proved to be false.

As is obvious we think a defensive posture is in order.  We will be commenting frequently.

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