The Chart du Jour
When the Dow Jones was attempting rallies between November of last year and February of this year, on eight separate occasions it vaulted above 11,000, but could never sustain a close above that level.
Similarly, in the last few days, and despite large heart palpitations on my part, the nearby March Nasdaq 100 futures contract has tested the the bottom of our 1680-1735 Fibonacci "buy zone," but avoided to date coming close to our suggested stop at 1645. That futures contract has now rolled off the board, so this stop should be adjusted to an equivalent level basis June. For those with a strong stomach, a stop-close-only order is probably best to work given all the extreme volatility we have been experiencing intraday.
On an overall basis, our stop may of course still get elected. And if it does, we will quietly retreat to the sidelines, reassess, and likely look for other signs of a turn later on. This market is not for the foolish and bold. It is best to be humble and timid, tentatively believing in the Fibonacci forecast for support that we have maintained in this region, but not becoming wedded to it. However, the fact that stocks like Cisco also effectively reached the $18 target (low was 18 3/8) we set for it back in early February, before rebounding quickly, gives us heart that we are correct.
Wave 3 of I down in the Nasdaq 100 is now probably finishing before a large Wave 4 of I chop higher that will likely take the rest of this year to complete. As this Wave 4 of I in the Nasdaq transpires, the Dow reverse-symmetrical (or alternatively called broadening diamond) formation could yet become a continuation pattern to one last spike high. This rally would then serve to instill false confidence in the markets, before a real disaster later on.
If January 2000 was "the" DJIA top, it has certainly taken its sweet time since then rolling over and playing dead. It would be an odd way for a parabolic advance to end. Usually the market would not have given one so many chances to have shorted the Dow if this top is really a significant one. Parabolic advances typically end in spikes, not choppy trading ranges that go on for months.
Although we still respect the implications of our earlier work, A 13th Century Mathematician and the Current Rhythm of the DJIA, as well as Three Peaks and a Domed House, we also must respect that the Nasdaq has already collapsed, and too much time has now transpired for the Dow to likely do the same straight away. It's chop-chop behavior is the hallmark of a 4th of V wave instead. Only below 9,200 will we think otherwise.
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