Is that it? No. Not yet. But careful chart reading pays off.

The Dow has been down 7 days like, you know, like two or three times in 23 years.  (We forget the exact sttistic becuase it doesn’t interest us much.)  A careful look at the chart here will show that one of those times was the toboggan run to the panic sell off in October.  Back in the old days you could pretty much buy the close on the fifth day down and depend on making a quick buck.  These here is different times.


The technical fact of importance here is that the little uptrend of the rally has been been destroyed.  And with a vengeance.  During this period we have continuously pointed out that the pattern was not a Kilroy Bottom (or upside down, sirsasana, reverse head and shoulders).  Analyzing this period as unfulfilled downwaves has been (so far) has been the productive approach.  This downwave which started 8 days ago will be unresolved until it takes out the November low or until it makes a higher wave low.  Is that clear?  It’s not?  Yes it is if you read it carefully.  Let us further muddy the waters, as the bluesman said.  The upwave from the November low ended the first trading day of January.  What ended it?  No higher prices, a lower close and then three days away from the wave high.  (All of this is carefully explained in StairStops.)  Actually taking out the November low will not resolve this present downwave.  It will resolve the larger wave pattern (October low, lower high in October, November lower low, January lower high, etc.).  This down wave will be resolved like all downwaves, when there are no lower prices and there are three days away from the low day.  Now we would like to take up the subject of normalization in statistics in order to destroy whatever brain cells you (and we) might have left.

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  1. alain

    The SPX 1005/945 trend line and the 737/900 line are showing a triangle formation. It had a 50/50 chance for a breakout either way. The breakout was at 910 and seemed ‘confirmed’ after the <882 close. By this time, we were also 3 days away, Jan 12 is currently my Basing Point.
    This would not exclude a possible new low (target SPX app. 642) while the Nov low, 737 spells a natural support to be broken prior.
    I hope I got that right.
    Great long weekend to all!

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