US 30 Down Trending: Double Cascade Correction Imminent
Updated
Busy chart. US 30 is trending down since 26 Feb 19, and 22 March Price Shock was pivotal IMO:
Note the long TL at bottom reaching back to 1996. Scroll R/L to see the extension. IMO this line will define the bottom for the 2020 bear market.
Note the two-year 'Trump' TL which has enjoyed a parabolic run-up since election and corporate tax cuts. This curve is unsustainable and will drop back to the long TL, sooner than later IMO.
NB: The 2018 Zig-Zag Correction and subsequent Bear Market Rally have produced a Head & Shoulders pattern on grand scale going back to Jan 2018 (triple tops charted under umbrellas).
In shorter perspective, US 30 is in a down trend since 25 Feb, when it made a lower high around 26240. It's trading well below that now, after rejection from the TL formed by highs of 03 October, 25 Feb (X-X TL). Small arrow over 19-26 March period shows stair-step of lower highs. Bearish engulfing candle on 22 Feb was extremely ominous; a clear sell signal, provoked by rate inversion, a highly reliable indicator of recession. According to WSJ on 3/24/19, the yield curve has inverted before each of the past seven recessions.
Nice article on what it means exactly and why it happens; essentially; bond investors' demand for long-term notes has driven their yields lower, as confidence in short-term paper falls, given an expectation that future paper will pay less: thebalance.com/inverted-yield-curve-3305856
"Price shock" on Friday 22 March occurred on/about Spring Equinox, a period often marked by trend changes. This arrived after a three-week rally following a brief decline from the 25 Feb high, a date 61 days from the 26 Dec trend change; significantly:
In "45 Years on Wall St" W.D. Gann noted;
"Rule 4: Buy and sell on 3 Weeks' reaction or decline... in a Bear Market sell on a rally of three weeks after you know the trend is down... After a market rallies or declines more than 45 to 49 days, the next time period is around 60 to 65 days, which is about the greatest average time the a Bear Market Rallies, or a Bull Market Declines."
"Rule 8. Time Periods; Dates for Changes in Trends: ...March 20 to 27th. Sometimes major tops or bottoms occur around these dates."
General observation: following a Price Shock, the market may Rally for 3-5 days before the Down Trend resumes in earnest. When these Rallies are rejected from a TL, the resulting reaction can provoke Panic Selling and Capitulation. Look back at Jan 29 Jan to Feb 1 and 3-10 October periods, where brief consolidation occurred just before Waterfall Selloffs, following the initial Price Shock.
Of the past 11 corrections of 10+%, 9 have produced double bottoms. Of the past 13 Bear Markets, only 7 have correctly indicated the arrival of a recession. The market is a lousy forecaster! But, this means that 46% of Bear Markets occur without a recessionary environment...!
See: cnbc.com/2016/02/04/can-the-markets-predict-recessions-what-we-found-out.html
WXYXZ patterns depicted only suggest a possible path, this is of course completely unknowable, as predictions are always hard to make, especially when it's about the future!
If you scroll back to Feb-June 2018 there are two 'M' patterns with the WXYXZ path. Although the markets could simply roll over and throw down to a double bottom, IMO a complex pattern is more likely, given the titanic struggle with Bulls & Bears ongoing.
I do not pretend to predict the course of US 30. However, it is apparent we are in a Down Trend; the index has rejected from the X-X TL and is rotating lower as it gets Mark-Down. The possibility of a severe Secondary Correction with Capitulation Panic within three months is quite real.
Note that the X-X TL intersects the 1996 Long TL at price 17,734... this nearly coincides with support back to 2015 around 18,023. Expect eventual bottom formation around Dow 18K.
Risk in US Equities is very high now. Prices are within 85% of ATH (All major indexes reached and turned back from Fibonacci 8:55 ratio = 0.85455). It would be prudent to exit long positions and preserve capital. Speculate on price mark-downs at your own risk!
That being said, I've taken Bearish Positions in: SDOW; SPXS; TECS; SPY 282 May Put; QQQ May 180 Put. Growl!
NB: This is not investment advice; just my own speculative idea; trade at your own risk! GLTA!
Note the long TL at bottom reaching back to 1996. Scroll R/L to see the extension. IMO this line will define the bottom for the 2020 bear market.
Note the two-year 'Trump' TL which has enjoyed a parabolic run-up since election and corporate tax cuts. This curve is unsustainable and will drop back to the long TL, sooner than later IMO.
NB: The 2018 Zig-Zag Correction and subsequent Bear Market Rally have produced a Head & Shoulders pattern on grand scale going back to Jan 2018 (triple tops charted under umbrellas).
In shorter perspective, US 30 is in a down trend since 25 Feb, when it made a lower high around 26240. It's trading well below that now, after rejection from the TL formed by highs of 03 October, 25 Feb (X-X TL). Small arrow over 19-26 March period shows stair-step of lower highs. Bearish engulfing candle on 22 Feb was extremely ominous; a clear sell signal, provoked by rate inversion, a highly reliable indicator of recession. According to WSJ on 3/24/19, the yield curve has inverted before each of the past seven recessions.
Nice article on what it means exactly and why it happens; essentially; bond investors' demand for long-term notes has driven their yields lower, as confidence in short-term paper falls, given an expectation that future paper will pay less: thebalance.com/inverted-yield-curve-3305856
"Price shock" on Friday 22 March occurred on/about Spring Equinox, a period often marked by trend changes. This arrived after a three-week rally following a brief decline from the 25 Feb high, a date 61 days from the 26 Dec trend change; significantly:
In "45 Years on Wall St" W.D. Gann noted;
"Rule 4: Buy and sell on 3 Weeks' reaction or decline... in a Bear Market sell on a rally of three weeks after you know the trend is down... After a market rallies or declines more than 45 to 49 days, the next time period is around 60 to 65 days, which is about the greatest average time the a Bear Market Rallies, or a Bull Market Declines."
"Rule 8. Time Periods; Dates for Changes in Trends: ...March 20 to 27th. Sometimes major tops or bottoms occur around these dates."
General observation: following a Price Shock, the market may Rally for 3-5 days before the Down Trend resumes in earnest. When these Rallies are rejected from a TL, the resulting reaction can provoke Panic Selling and Capitulation. Look back at Jan 29 Jan to Feb 1 and 3-10 October periods, where brief consolidation occurred just before Waterfall Selloffs, following the initial Price Shock.
Of the past 11 corrections of 10+%, 9 have produced double bottoms. Of the past 13 Bear Markets, only 7 have correctly indicated the arrival of a recession. The market is a lousy forecaster! But, this means that 46% of Bear Markets occur without a recessionary environment...!
See: cnbc.com/2016/02/04/can-the-markets-predict-recessions-what-we-found-out.html
WXYXZ patterns depicted only suggest a possible path, this is of course completely unknowable, as predictions are always hard to make, especially when it's about the future!
If you scroll back to Feb-June 2018 there are two 'M' patterns with the WXYXZ path. Although the markets could simply roll over and throw down to a double bottom, IMO a complex pattern is more likely, given the titanic struggle with Bulls & Bears ongoing.
I do not pretend to predict the course of US 30. However, it is apparent we are in a Down Trend; the index has rejected from the X-X TL and is rotating lower as it gets Mark-Down. The possibility of a severe Secondary Correction with Capitulation Panic within three months is quite real.
Note that the X-X TL intersects the 1996 Long TL at price 17,734... this nearly coincides with support back to 2015 around 18,023. Expect eventual bottom formation around Dow 18K.
Risk in US Equities is very high now. Prices are within 85% of ATH (All major indexes reached and turned back from Fibonacci 8:55 ratio = 0.85455). It would be prudent to exit long positions and preserve capital. Speculate on price mark-downs at your own risk!
That being said, I've taken Bearish Positions in: SDOW; SPXS; TECS; SPY 282 May Put; QQQ May 180 Put. Growl!
NB: This is not investment advice; just my own speculative idea; trade at your own risk! GLTA!
Trade active
Got a little 'h' forming as markets retrace the drop from March highs to near the 0.62 Fibo. May bull a bit higher on weak RSI and low volume advance to as much as 0.76 Fibo, near 2750, 25850, 7740. Let's see!Iinteresting perspective on yield inversion:
marketwatch.com/story/this-time-an-inverted-yield-curve-suggests-the-stock-market-has-already-peaked-some-analysts-say-2019-03-28?mod=mw_theo_homepage
Note
In bigger picture index makes a pennant in what appears to be a possible 4th Elliott Wave. If so, there will be a final leg V higher, as pennants are continuation patterns. Terrific bullishness overnight in anticipation of Trade Deal... expect disappointment!Equities are at critical juncture, will either turn back and tank off, or be trapped in range-bound trading; or breakout and move to ATH. Let's be patient and cautious. Do not plunge big positions either Bull or Bear!
Note
Clipped a few pieces off Friday on the intraday sells but closed all positions before EOD as index makes pennant = triangle and these are notorious for breaking either way. Usually a continuation pattern so if the uptrend prevails, will break up. Series of higher lows on each sell wave during day... hmmk, be carefull!Note
Yes the triangle broke up at 3PM Friday. TL is close above at 25980; break above 26K will invalidate this idea. Keep an eye on it- good wknd!Note
Holding on to the idea with no position yet, waiting to see if it breaks the long TL at 26490 or gets rejected. Any positives on trade now will spark explosive surge. A disappointment will crush it. All risk, any position a gamble now.
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