Wednesday, March 06, 2013

Lindsay says down then up

Here is a daily bar chart of the Dow Industrial average going back to the beginning of 2011.

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.


Bill said...

Again Carl, excellent work. Love it every time you post your analysis. I agree with you, the wild card though is the Fed. Can a market correct 10% when $85 billion of bond purchases a month are juicing the stock market. Since the bottoms in 2009 any correction of 10% or larger came when there is no QE. Other than this I would totally agree that the market is more than ready for a 10% correction.

Adsense said...

Hi Carl
I took the time to look at the mini
3 peaks pattern today .I have been following the weekly pattern and at the moment thinks its complete .
that said the mini 3 peaks you spoke of looks valid . if it is then most like point 21 is now complete which implies a decline is going to be a short lived affair to point 24 .
bottom line : the weekly chart looks complete yet the daily chart does not ( pt 21 today ? )
if so we have a sideways movement about to form ( head and shoulders top formation )
good luck