Chip,
Thanks for prompting a discussion concerning the Dow "Diamond" reversal pattern. I've had the Diamond lines in place for nearly a full year tracking this pattern like an oncoming cat 5 hurricane... and just today we're beginning to see hints of its destructive force.
You generally get a false break from a large Diamond pattern, and that's what I view the rally from 8/11/00-9/6/00 as. The right declining diamond line was broken on 8/11 at a price point just under 11000. This rally fizzled, and the AUTHENTIC break direction was confirmed as the sell-off took the Dow lower in a 5 wave move that bottomed on 10/18/00. This wave down began a very large degree correction (supercycle), and was only wave 1 of A. 2 of A rallied back to the 2/6/01 high, which for the pattern's sake was simply a snapback to the prior false breakout point from 8/11/00.
From the 2/6 high, the Dow began the very powerful wave 3 of A from there. 1 of 3 of A completed at the 2/23 low, and 2 of 3 of A rallied back to the high last Thursday 3/8. From that high, wave 3 OF 3 OF A began, and all E-wave students KNOW the power of 3 OF 3. Great power was unleashed today, but we in my view are only beginning to see the outter bands roar by.
How low does it go New York? Diamonds don't yield ultra reliable target projections, but for the record, this one's target is 6,466, which is derived by measuring the height of the diamond and dividing it by .382, then subtract the result from the high point of the diamond to yield the projected target.
Another pattern I like to use after a large and time consuming wave 1 & 2 has formed (9/6/00-2/6/01), which i've coined the "fortress top", has a short-term target of 9400, and a final target of 7700. This fits better with the wave counts, which suggest 10/98's lows should hold.
I've maintained my bearish posture & positions since posting here Thurs. noon that I had just deployed heavy nuclear ordinance. What a trade this one has been, Glory to God!
Regards,
David |
