Review of stops in the INDU….

And of course the Dow chart and stops are the touchstone for all indices.  And also for individual stocks.  Thus, if the the Dow stop is hit you should be looking at all your positions and reviewing their proximity to their own individual Basing Point stops.

We observed the 23rd that the short term trendline was broken — in addition to all the other signs of hurricane weather.  Now somewhat ominously the long term trendline from Sep 10 is broken.  And, on a strong power bar.  It may be possible that the market wants another shakeout here before the bull market resumes.  The trendline from Mar 09 –the crucial line — is down about 11700.

A violent shakeout, like that of last May seems unlikely, but when the black swan sings, the elephants dance and the ants try to find a place to hide.  Anyway we have put up the chart with stops which we will explain here.  The highest stop, at 11565.03 is calculated using Variant 2 of  the Basing Point procedure and a 6% filter.  (See StairStops book.)  You will remember that this procedure would have saved much grief last May.  The next stop down is calculated from the wave low point in November using a 5% filter = 10382.81.  The next line down 10273.52 is a 6% filter.  The violence of and volatility of  the May downwave made a 6% filter most effective.

These are wide filters but it is our considerable experience that long profitable trends must suffer downwaves of great force as they play themselve out.

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