LG,
Hope it's still weekend when I post this.
Dow 10,000 looks to me just like Dow 1,000. A challenge once met, it leaves nothing much to look for.
The recent rally from the January - February trading range looks a lot like the rally last year from the April - June trading range to the July top.
Last year it was the Russell 2000 that topped in April and developed a LT downtrend still in effect. Now it's the NASDAQ that topped on 2/1 and used the Dow and S&P reaching new highs only to come close to its high last Friday and sell off sharply from there.
It is agreed that market breadth is bad, and New Lows count remained very high lately even as the Dow and S&P went to new highs. Not a healthy market, in fact it looks worse then last July.
What I'm looking for is a correction one degree larger then last year's July- October. In EW terms- Last year's correction was Minor 4 (correcting for the bull leg from 7/96 to 7/98 which I counted as Minor 3), and the coming correction will be Intermediate 4 (correcting for the bigger Intermediate 3 bull leg from 12/94 to the present).
The correlation with Dow 1000 is IMO even greater, as I believe we've started to develop a compressed version of the pattern in seen in the 1966-1972 end of Cycle 3 - higher highs and lower lows, with deteriorating A/D line.
So what I'm looking for is a 35%-50% crash taking us below the October lows, but probably not much lower, with SPX 650 the extreme down side, and high 800s the most probable. In the next year or two the market could erase all the losses and reach marginally new highs (that would be Intermediate 5 of Primary 5 of Cycle 5) around Dow 10500-12000, from which the Big Bear will start. That big bear should have the magnitude of the '29-'32 "correction". Mind you, I don't know if it will be SHARP like '29, but I believe it would have the same severe impact- a Big Depression and all that follows (unemployment, crime).
Signs for the beginnig of a break:
- Russell 2000 breaking 389 neckline (all clear signal above 407.5).
- NDX trading below 13 dma (currently 2024)
- NYSE composite failing to hold over 616, and dropping below 602 support.
- SPX trading under 1286 broken resistance
It will end in tears
ATG |
