Beginning of a Bull Market Correction?
A few days after my above post Europe gave Greece an expensive pill and was told it to go to bed and rest..... the global market was happy with that and the US Equity Markets bounced off that 12750 support and continued their Bull Run and squeezed out another 4% rise..In April the worries returned and the 12750 support got busted only to bounce back up to resume the bullish mood creating a 12710 support with an equal top .....until now!!
Now we are at another TA critical juncture today a break of that 12710 support to a lower low. The very slight Broadening formation has been created, it is descending in character, that being of equal tops and lower lows...this formation is under threat of a breakout to the downside as well.
http://i458.photobucket.com/albums/q...OW14052012.png
Bull market Correction is happening
The DOW broke out downwards from its slight broadening top formation towards its target of 12100.
This target will need selling pressure (e.g bad news) around the support zone if this target is to be reached...
In the meantime the downward movement has been arrested by a pullback which is common event (occurs 50% of the time) after a formation breakout.
Expect this pull back to test the bottom boundary of the old broadening top formation or it could go back inside it to test the 12700 area. If the pullback fails these tests expect the DOW to fall again towards it's target 12100 testing the support zone.
If the pullback is strong and busts back through the 12700 area expect it to rise to 13000 in it's quest to gain a new high which would indicate the Bull market Correction is over.
http://i458.photobucket.com/albums/q...OW22052012.png
DOW Theory signals a primary bear tide
A Bull market correction in progress??... or.... has the market topped out and the Bull has died??..........
Dow Theory says the Bull has died.
How relevant is DOW theory in today's world is debatable...however it's called a theory because of its proven track record....and it's has been impressive.
http://i458.photobucket.com/albums/q...ak23052012.png
17 May:- DOW Theory signals primary bear tide
Dow closed at 12742 today ... Recent media is signalling that the correction is overAll the buy triggers have gone off
Hmmm ...they assume the DOW and S&P500 is still in a Bull Market Cycle.
OK the 21st Century debate consensus is that the DOW theory is not as good as it used to be....
If the DOW theory is correct however ......the correction has not ended, it has begun in a form of a bear market rally (sucker rally). TA buy triggers go off with these types of corrections too.
So whatever you believe is happening atm just be careful around certain resistance points. Fibonacci Retracements between 1/3 and 2/3 area are typical secondary correction perimeters Since the retracement off the bottom has passed through the 50% the next area to watch is the 61.8% which is the 12850 area (not shown on chart). 13000 is another resistance area... both these areas are investor behaviour sensitive (psychological).
If this is a bear market rally expect the rally to peter out below the previous high. (13300)
If this latest rally creates a new high DOW Theory has failed (Modern day Failure rate less than 20%???) and the bull lives on.
Update of Post #843 Chart (22nd May 2012)
http://i458.photobucket.com/albums/q...OW18062012.png
Did the Bulls try to kill off the DOW Theory Bear..or is this DOW Bear just a mirage?
Since my last post the unmentionable happened ....a 6 week bull rally occurred when all the technical signs pointed towards a correction.....however the bully rally failed legs to continue well above that 13300 break level to cement in the start of another bull uptrend and thereby turned itself into a sucker. ...However this mini bull rally did break all the Technical and DOW rules and caused the DOW Theorists to run for cover and reexamine their DOW Theory cyclical change criteria.
...and the argument still continues ..is the DOW in a Cyclic Bull Market Cycle or a Cyclic Bear Market Cycle? yes no yes no.... maybe.
I take the view that during the early stages of Phase 1 of a cyclic bear market cycle it is very difficult to tell where the actual beginning of the cycle occurs...if we did know we would be all be genius's and richer than Buffett....The actual cyclic point can usually be found well after the event with hindsight.
In the short term it seems we will not know the DOW's cyclic nature as this downtrend looks to be weakening .....The next rally will create more arguments among the purists.....
What to watch for ....If this downtrend ends now and the next rally fails to break up through the 13100-13300 Resistance zone then this would create more evidence that the cyclic bear is roaming around Wall St. (lower high)
....If the downtrend pauses then continues down below 12035 ...ditto...(lower low)
EDITED CHART. ....The primary trendline is under threat... these breaks can also be cyclic change signals
http://i458.photobucket.com/albums/q...16112012-1.png
How high will this 2009 rally go
People are now asking the question..how much higher can the DOW go??????
http://i458.photobucket.com/albums/q...OW22052013.png
The chart of the day people posted this chart today
http://www.chartoftheday.com/20130522.gif
Looks like this rally could last another 1000days and go to 26000 to just to get to the average.........the chart shows good news...eh?
Since the year 2000 the DOW has been in a secular bear cycle :(
I have colour coded the chart of the day which shows only one secular bear cycle rally has gone further than the 1900-2010 average....the chart doesn't look so good now does it
http://i458.photobucket.com/albums/q...DowRallies.png
Updated Chart 2 weeks after the pattern busted
Quote:
Originally Posted by
Hoop
Hmmm...Some TA warning bells going off around the DOW's record top...
Indicators have a habit of crying wolf during the last stage of a bull market cycles thereby making investors believe the indicators are useless and proceed to start ignoring them and the whole discipline in general....It teaches investors bad habits together with complacency of piling $$$ in at the top with a sense that the market will never fall for any length of time..how many times now have we heard lately.. "I don't care if the price is dropping I'm buying now for the long term"
....anyway..... when a true correction (or worse) begins to happen the indicators will always fire warning signals..so as tedious as it is we should always be careful and alert..cry wolf or not.
On the chart is Martin Prings Special K indicator...this indicator helps detect (primary) trend changes..and can sometimes fire early (predictor)....as with the rest of the indicators it too can cry wolf...
The busted Head and Shoulder pattern creates some uncertainty..it can bust back and keep rising to its TA target (17950) or it can fall...If it breaks the short term support and MA50 area (16950) then expect the DOW to fall to the head price 16350 area (Bull Bear line) and yes perhaps breaking the MA200 too..............
Update as of the 10th October..
It didn't bust back, instead it failed to regain that short term support and on Thursday the DOW capitulated and Friday it broke the MA200 and on its way as expected to reach the 16350 head price support area
http://i458.photobucket.com/albums/q...OW10102014.png
Is the Dow in Stage 1 Cyclic Bear Market Cycle?..your guess
Quote:
Originally Posted by
Daytr
DOW bounces becoming shorter & shorter, forming lower highs............. however the index itself looks vulnerable.
Perhaps lower first & that creates an opportunity?
Others thoughts?
I'm going to make an opinionated guess (risk of egg on face) and say .....The 6 year old DOW Bull is dead... it died 5 months ago
Note: ..Not yet confirmed by DOW Theory(Confirmed by DOW transport (considered unreliable these days) but not yet by the S&P500)
I personally think the DOW has been in Stage 1 of a Cyclic Bear Market Cycle for 5 months in the shape of a longer term trading range pattern... Many of my personal Cycle Reversal Indicating "Ducks" have been waddling around in an increasingly lengthening row with other ducks joining the line every now and again since early 2014... Usually Stage 1 of the Bear Cycle is very hard to determine and leading indicators can get slowed down or arrested once formed (e.g FED manipulation) ...that's my excuse if I'm wrong..:)
Something else to remember with Cycle Theory ...Cycles always go forward, never backwards..they are distance traveled events and not time dependent...therefore a cycle can be slowed or stopped but can not go in reverse..Like death and taxes a bear cycle after a bull cycle is inevitable.
In DOW Theory Stage 1 is the Distribution Phase
This phase can be variable in time...and can take various pattern shapes..Since 1999 the DOW has seen two different types of Stage One Bear Cycles
1... a trading range pattern with one or 2 warning dips that quickly recover due to dip buying. This pattern lasted for many months (8 months in 2000) with only a hint from the straddled MA200 of a slightly bent downward trend.
2...The 2007 stage 1 lasted for only 9 weeks with a double top bearish pattern and consisted of a sharper peak type formation with larger volatility. The Media and the Public think of a bear market cycle as dramatic so they assume every bear cycle will have this type of Stage 1. In practice it is the rarer of the two types mentioned.
Usually a stage 1 bear is the 1 type mentioned above and therefore goes unnoticed by most investors as they are still optimistic about the future outlook of their country's economy..and the fundamentally rosy looking forward earning projections
Stage 1 becomes noticeable after it ends and the more destructive Stage 2 (10-20+%) dips with sucker rally recoveries become the "norm"...even then there will be investors + Gurus still in denial..This is the stage that TAers see their sell signals appear and sell long and start buying short or play the sucker rally game.
The last stage (3) is the characteristic doom and gloom capitulation phase that most people think of when talking Bear Market Cycles..