Tuesday, August 03, 2010
Three Peaks and a Domed House
It has been more than 18 months since I last commented on George Lindsay interpretations of current stock market action. In my 2009 stock market forecast section on the three peaks and domed house formation I said:
Thus we should expect to see a major Three Peaks and a Domed House formation start to develop soon. The Domed House advance should take up the best part of 2010 and end the bull market which started from the November 2008 lows.
I think there is a clearly delineated major three peaks formation now visible in Dow industrials and in the S&P 500 as well as the Nasdaq composite. The daily chart of the Dow is at the top of this post.
I think the point 10 low that separates the three peaks from the domed house parts of the formation occurred on July 1. Point 14 occurred at the July 30 low. Lindsay theory asserts that point 23, the top of the domed house advance, should occur about 7 months and 10 days after point 14. This calculation predicts a top for the domed house advance for March 10, 2011 somewhere above the April 2010 top in the Dow.
There is one alternative, less likely scenario that is worth keeping in mind. It is conceivable that the January 6 top was point 3, not point 5. This change would make the April 26 top point 5 instead of point 7. In this alternative scenario point 7, the third peak, lies ahead of us and would probably develop a little below or a little above the April top in the Dow. The subsequent drop to point 10 in this alternative scenario would have to carry the Dow at least below its February 5 low, although not necessarily below its July 1 low.