Don,
Im just not seeing alot of support for a strong rally in the NDX, especially with the 3 BLACK CROWs in the SPX/OEX.
If I might pick your brain a bit about the "Crows". In my limited reading I have seen references to 3 black crows implying that it is a topping formation terminating an uptrend. For example:
litwick.com
litwick.com
Your comments seem to indicate your belief that the trend leading into the series of down days is not significant.
Also, my brain is wrestling with the number 3. My view of the SPX chart is that we already had three identical black crows at the close on Tuesday, though Monday's bird was somewhat smaller than the others. Would it then be wrong to conclude that the action on Wednesday and Thursday was the follow through for that pattern? If so, at this point the pattern cannot fail; it is already fulfilled.
As for other places in recent history where this pattern has or has not failed, there are a few examples where what one might call four or five identical black crows have marked at least a near term bottom (bottomed that day or the next and held for 10 or more trading days), if not an ultimate bottom (if there is such a thing). I'm looking only at SPX: 5/23/00, 4/14/00, 10/15/99, 4/19/99, 3/2/99, 1/14/99, 10/8/98, 8/31/98, 1/8/98. And here are a few three identical black crows that failed to follow through to further downside, or marked a bottom that held up for quite some time: 7/28/00, 4/14/00, 5/25/99, 3/23/99, 4/27/98, 1/23/98. Here a few instances where a three to five day set of crows soon followed through with more downside, excluding this latest decline from September 1, which has a series of them: 5/4/00, 1/24/00, 9/15/99, 8/31/99, 8/4/99, 7/26/99 last three in one extended decline), 8/4/98, 7/23/98 (both part of one decline), 12/19/97, 12/11/97 (both part of one decline).
My general impression is that during any extended decline it is easy to find 3 or 4 identical black crow series, but at least over the last three years it is just as easy to find 4 or 5 identical black crows that terminate a downtrend.
So it comes down to a few questions. Is there anything to the implication that the black crows are significant in terminating an uptrend, but less so as part of a downtrend where you would expect to see them anyway? Does the pattern "lose power" once you get past the third day? In other words, does it make sense to be calling for a further decline on the basis of three black crows that are part of a bigger flock? After all, these things all end eventually, and the strong deep bottoms of the last few years have all formed this way.
Dan |
