Rule of 7 applied to present market…

Posted on Apr 27, 2020 by in Letters

http://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=1&mn=0&dy=0&id=p20970412253&a=743888765

Our alpha beta zeta analysis entry point appears (so far)  to have been fruitful and well timed.  This pattern recognition and analysis are wholly of our own creation.  We say this in order to say that it is our practice (and of most of the technical community) to acknowledge the work and tools of our predecessors and we usually we don’t bother to point these things out.  But here we are making an exception to post a link to an article explaning the Rule of Seven.  We forget who authored this article but that is unimportant as it is described in one of the finest books on technical analysis, Techniques of a Professional Chart Analyst by Arthur Sklarew.   http://www.edwards-magee.com/ggu/ruleofseven.pdf.

The Rule of Seven is one of those alchemist black boxes that seem to aid in analyzing waves–how far they will go, etc. On the present chart we have posted three numbers from this rule which seem, to us, to imply that the violent down wave which started 2/19 may have run its course –which, of course was the point of the alpha…zeta wave analysis.

Then, are we in a bear market rally?  Silly to speculate.  The chart says we are in an upwave and really the talking heads calling the market bull or bear or mule is vacuous opinion.  The question which should be asked is:  how big should my position be?    The answer oscillates between minimal and all in.  We will address the practical and theoretical aspects of this question in a coming letter.

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