Wednesday, March 06, 2013
Lindsay says down then up
Yesterday the Dow closed at a new historical high. But this high looks very much like point 23 of the mini- three peaks and a domed house formation which began with the September 2012 top. If so the market is very close to an important top. The prognosis is that once this top is in place the Dow will drop below its November 2012 low.
If we see a top within the next two or three weeks then it will begin to look like a major three peaks formation is developing with the first of the three peaks in May of 2012. The third peak in such a formation should not occur more than 10 months or so after the first and the market is already pushing against this time limit now. If this rally lasts much longer, say into April-May, then this major three peaks hypothesis will start looking pretty shaky.
One attractive thing about the potential major three peaks is that the three peaks formation requires a subsequent drop below either the low after the first peak or the low after the second. And the current mini-domed house projects exactly that via a drop below the November 2012 low.
The second attractive aspect of this analysis is that the rally from that projected low below the November low should last about 7 months or a little more and carry the market above the highest of the three peaks. Now there is a Lindsay long term 15 year period from bear market low to bull market high which starts from the October 1998 low and projects a bull market top for January 2014. This would coincide nicely with the projected top a major domed house which would follow the currently developing major three peaks. Moreover, I think a Lindsay basic advance began from the October 2011 low. Such advances generally last a little more than two years and end at a bull market top. This is another piece that would fit very nicely into a market puzzle showing a bull market top early in 2014.