Analysis - Monday, March 12, 2001 8 pm
Last evening we told you that the downturn in the 3-Day
Chart on Friday suggested a probable downturn in the Weekly
Chart early this week. This was because when the 3-Day Chart
turns up or down, it often is followed by a turn
up or down in the Gann Weekly Chart. For the Weekly
Chart to turn down this week the Dow had to fall below
10469 on a print basis and 10394 intraday. At the lows today
the Dow was down 478 points, reaching a print low of
10166.62 and an intraday low of 10138.85. Not only did the
Weekly Chart turn down today, but as usual, it was followed by
even lower prices. There is no rule on how much further down
the Dow will fall once the Gann Weekly Chart turns down.
Sometimes a downturn in this chart is followed by only a mild
further decline of 100 to 200 points. Other times a downturn
in this chart has ultimately been followed by a much more
serious plunge, as we saw today.
The real question we must deal with tonight is what does
today's action tell us about about the future course of stock
prices this year? Prior to today's plunge the primary index
that was clearly in a Bear Market was the Nasdaq. As of last
Friday's close the Dow was still down only 9.2% from its all-
time bull market closing high. The NYSE cash index as of
Friday's close was down only 7.2% from its all-time high. The
S&P 500 cash index was one of the few major indices which was
down significantly, other that the Nasdaq. The S&P 500 was
down over 19% at last Friday's close. Still, the Dow Jones, the
NYSE cash Index, the Amex and the Transports were all holding up
fairly well until today. Now of the above, the two indices which
have performed the worst were the Nasdaq and the S&P
500. The one thing these two indices have in common is the
fact that our Gann Yearly Chart on both the Nasdaq and the
S&P 500 have turned down this year. We have stated for the
last few months that if the Yearly Chart on the Dow turns
down anytime this year, we believe the entire super bull
market which began in 1982 is over. The reasons for this
position are too involved to try to explain in this brief
update. We will just say that this very important Gann Chart
has not once turned down for almost the last 19 years. It
turned up after the 1982 lows and has never turned down since
then. This is why we have held that despite the corrections
and the so-called "mini-Bear Markets" we have seen over the
last 18 years the long-term bull market was not officially
over. For the Yearly Chart on the Dow to turn down this month
the Dow would have to fall below 9571 intraday. Today's low
was 10138.85 intraday, so for now we are quite aways from 9571
intraday. As long as we hold above 9571 intraday, we would
continue to be bullish here despite any correction. If we fall
below that level by even one tick in the Dow, we believe the
long-term bull market will officially be over. Now, even if
that were to occur, by which we mean even if the Dow were to
fall below 9571 intraday from here, it would not mean that you
should sell all stocks that very day. That is because, more
often than not, when the Yearly Chart has turned down over the
last 104 years the Dow has reached at the very least a short-
term low either the same day or within a couple of days, and
then began a strong rally. In fact, some of those rallies
continued upward for a few months before falling to new lows.
What a break of that 9571 intraday number would mean is that
the longer-term trend has changed, and that you should sell
long positions during the rallies which inevitably will
follow.
We do not want you to assume from tonight's update that we
expect a decline below 9571 intraday in the Dow from here.
We are not convinced of that just yet. Let's just wait and
see what the next few days bring.
The Cycles call for a low near Tuesday, March 13, plus or
minus 1 day. From there a rally is expected into March
21, plus or minus 1 day.
We will take no new action at this time and we will have
new instructions for you tomorrow evening |
