Monday, April 28, 2008
Above this post you will see a daily chart of the Dow Industrials showing my interpretation of an ongoing George Lindsay Three Peaks and a Domed House formation in the Dow. Above this chart you will also find a weekly chart of the Dow showing my interpretation of the market's position within its sequence of Linday's basic advances and declines. I last commented on Lindsay's approach to the market here.
The Dow traced out a clearly defined three peaks extending from July through December 2007. The subsequent separating decline was quite a bit bigger than normally associated with a three peaks formation. I am placing point 10 at the March low rather than at the January low because this placement allows for a clearly defined point 14 in April. The standard time interval from point 14 to the peak of the domed house at point 25 is 7 months and 10 days which would put the top in late November of 2008.
The top called for by the Domed house projection comes early relative to the top predicted by the sequence of basic advances and declines I have highlighted on the top chart. Since the basic advance which ended in July 2007 was an extended one Linday's theory predicts that the subsequent basic advance will be subnormal in length. The shortest basic advance Lindsay recorded lasted about 14 months and there were several instances of subnormal advances lasting 16-17 months. I am guessing that the current basic advance will last about that long. It would then match the length of the first basic advance from the 2002 low point.
These two projections can be reconciled if the Dow spends about 9 months in an essentially sideways trading area from December 2008 through September 2009. The subsequent basic decline would then be a more extended and substantial drop than we saw from October 2007 through March 2008.