As we approach the anniversary of the March 2008 apocalypse (funny how fast a year passes when you’re having fun) a biopsy of the market is in order. (If the market doesn’t need a stent, we might.)
The Dow (read market) is being supported by horizontal trendlines. (Prices are now resting on the September wave high.) Both the important upangled trendlines are broken and the sideways to down picture reflects this tautalogy. Aggressive chartists will often take these broken trendlines as signals to exit or short. More conservative Magee chartists will wait for the confirmation of Basing Point stop violation.
When the trendline from March was broken in November and December we pointed out the inevitable consequences of this violation: sideways to down. So far the consequences (while unpleasant) have been minor. (Well, it’s been nasty for us too. We gave back some profits.) So note that the Dow Basing Point stop has not been taken out. (9719 as we pointed out in our letter “Analysis to make your head ache ” 2/1/10 ).
With price now between the Feb high and low we wait with interest. Breaking the Feb low will be negative –perhaps very negative — and taking out the Feb high will be positive — perhaps very positive. Prudent readers will be justified in sitting quietly and reading Jane Austen. Aggressive readers will be reading War and Peace.
We will be reading our Ouija Beard and crystal ball and reporting anything interesting we see there.