The chart above is a daily bar chart of the Dow going back to September 2010. As you know I think that an example of Lindsay's three peaks and a domed house formation began in the spring of 2011 with the three peaks I have labeled as points 3, 5, and 7. The schematic at the top of this post shows how the typical formation evolves from the three peaks.
My own interpretation of the market's position in this pattern is that the top of the domed house, point 23, still lies ahead of us and will be above the levels of the March-April 2012 tops which are labeled as points 17 and 19. I have two reasons for this interpretation.
First, the typical point 23 develops about 7 months and 10 days after point 14 (although there is a lot of variability around this average duration). This projects point 23 near the end of this month.
Second, if you look closely at the price action which follows the high which I have labeled as point 19 you will see another, classic example of the same three peaks and a domed house formation - but a much smaller/shorter one. Lindsay himself observed some examples of this phenomenon, i.e. a minor 3PDH occurring during the development of points 15-20. It looks like this minor formation is just completing its own point 14 and the implication is that the Dow will move to new highs before the minor formation is complete.
I know that some of you Lindsay fans think that what I have labeled on this chart as points 15, 17, and 19 are in fact points 21, 23, and 25. This implies that the bull market top has already occurred although sometimes point 27 develops above point 23. While I don't agree with this view I have to admit it is a real possibility. So if the Dow should retrace more than half of its rally from point 20 after August 1 I probably will adopt this view myself.
In the meantime I am looking for a rally which should begin soon and carry the Dow above its March-April highs.
11 comments:
Looks more like 26
Thanks, Carl.
Nice to have the update. Appreciate your mentioning the alternate view (that the dome is already in) and what conditions would change your mind that the alternate view is in play.
Hi Carl
I agree its a tough call at this juncture however i have not seen a completed 3 peaks domed house pattern myself and have just let it run over the past several weeks to see how this traces out . I mentioned
TEVA few weeks ago and i still think that is a stock worth watching
as for the dow ? the similarities to 1910-1913 still stand and would call for a move higher before completion. all that said we are coming into a what should be normally a cycle high july 16th 19th and if the dow was to produce a low in that time period i would have to accept the bullish market into feb 12th 2013 . this is something i have had a hard time accepting over the past several months yet i am open to it .
there is also a translation to precious crash patterns based on
1987 and the 1929 markets what make the case for a move higher is due in short order this would target a high on or near oct 10th
2012 . i am starting to allow for it if this market starts to turn higher . lastly you mentioned the end of the month targeting a high
if that is to be proven true ?
i realize you were being open with that thought , it would correlate to the mid august 2007 to early Oct 2007 move . should be interesting to see how all of this plays out in the coming months .
good luck
joe
The pattern is notorious for the H&S pattern labeling the top....the H&S we had from March to May is about as clean as they come. I think we are way past the point of guessing where we are on the pattern. Your take is still interesting non the less and I as well as everyone else (Im sure) appreciate you sharing.
Carl, something else I would recommend you do some research on is how the base (the angle of it) can effect the time frame between 14 and 23. This is done using another technical system from Lindsay
I spent some time reviewing this and something else I found that conflicts with the way you are depicting the pattern is there is no "2nd wall of worry" 15 to 20 should be more choppy, building the base before the move to 21 building that second wall. I know you are guessing this works itself out by 21 forming well over 19. It will be interesting to see what happens
Anyway you could do a update on this? The smaller 3PDh is pretty clear which I find very interesting, we ramped up just as you expected but didn't take out highs (inside the end of month time frame), curious as your take on this. At this point I almost feel we get one more pullback which would make 20 on the smaller variant (Friday being 19) and run to new highs creating the H&S topping pattern
I still think point 23 lies ahead of us. In fact I don't think we have seen point 21 yet.
Carl,
How about an update on '3 peaks/domed house'? Guess we're working towards 21 now ? After this move peaks, one more down and one more up, and then we're done ?
David L
I would also be curious for an update Carl. I am seeing us working on 23 in the smaller 3PDH and 27 in the larger one, with both points being around 1445-50 SPX, I think we get that sometime from now to the FED meeting next week.
Update?
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