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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

“WALL STREET” the Movie, And What It Means For the Stock Market

Stock-Markets / Stock Market Sentiment Mar 04, 2010 - 07:35 AM GMT

By: Antony_Ganzitti


Best Financial Markets Analysis ArticleI came across a rather interesting phenomenon recently.  I am an avid observer of price charts and take an unorthodox approach (at times) to trading.  I am a big fan of market cycles, Elliott waves, Fibonacci ratios, patterns, and believe in the all conquering theory that price action is the ultimate key to market success.

But back to the topic, “Wall Street” the movie.  For those who are unaware Wall Street 2 is being released on April 23rd of this year, the highly anticipated sequel to the Wall Street movie of 1987.  Many probably are also unaware that the original movie was first released back in 1929, yes 1929.

So what am I getting at here???  Well we know that 1929 and 1987 marked some incredible years in stockmarket history.  So I looked into the occurrence of any tradable patterns that may exist knowing that the third Wall Street movie is due to be released this year, 2010.  Following history, this may mean that 2010 could go down as a year with as much significance as 1929 and 1987.

Let’s take a closer look at the patterns which we can observe from the uncanny matching of the Wall Street movie to datasets based on Dow Jones Industrial Average values below.

Now to draw a conclusion from the obviously unorthodox pattern extracted from the release of the movie we need to fill in the blanks above.

  • 38 calendar days from 19th January 2010 peak marks the 26th of February as an important date.
  • 28 trading days from 19th January 2010 peak marks the 26th of February as an important date.

While the market may not have conformed exactly to the perfect pattern set by the data from 1929 and 1987 by not reaching an initial retracement high at the exact time interval, we are able to draw a significant conclusion about the importance of the 26th of February as a price point.

Applying price action we can see an inside bar in the market last Friday which also resembles somewhat of an indecision bar with the open and close at almost identical price levels.

One other crucial piece of data which seemingly fits this scenario very nicely is the further application of price action, and this time the importance of one single daily price bar or candle within which stems a tremendous amount of information.

The day of Friday 3rd of October 2008.  Take a look at a daily chart of the Dow at this date.  As an observer of price action this candle is probably one of the single most important daily price bars in the 2007-2009 sell-off.  This is what we call a bearish reversal candle.  Although the market was well advanced in having been sold off, this candle marks the price point at which the bulls in the market totally and utterly succumbed to the forces of sellers.  Although the market was only down 1.5% for the session, the daily range was 582.9 points, and the DNA or the footprint which that candle left on the market was significant.  Over the next 5 trading days the market went on to lose more than 2000 points, certainly the most intense period of the 2007-2009 market fall.

This is where things really start to get interesting.  The DJIA on that day closed at 10325.38.  Last Friday, the 26th February 2010 the market closed at 10325.26.

If this bear market is to establish its presence yet again, from both a cyclical and price action point of view, now is the time for traders to be on high alert and look to establish themselves for what may likely be the third and most destructive wave of this bear market.  Should a bearish scenario pan out, my downside targets are 8500 this year, followed by 5500 in 2011/2012.

A further interesting data point extracted from the comparison of 1929 and 1987 DJIA data to the release of the Wall Street movie is the occurrence of so called “Black” market days.  Black Thursday occurred 24th October 1929, 51 calendar days after the market peak.  Black Monday occurred 19th October 1987, 55 calendar days after the market peak.

Relating this to 2010 DJIA data means we see the 11th – 15th March as a period of interest.  Keep in mind the Dow bottomed on the 9th March 2009, another cyclical point of interest, with 1 calendar year separating the dates.  Also of interest, the 360 trading day anniversary of the price bar of 3rd October 2008 is on Wednesday 10th March.

Final word.  10325 on the DJIA is my line in the sand.  Any signals from this level will allow for a finely tuned positional entry with an extremely high risk/reward ratio, and an easy to manage risk level.

A note to traders and investors.   All market based activities carry risk.  The above is one traders point of view based on probabilistic information derived from studying available datasets.  This in no way is deemed as financial advice.  Charts courtesy of IRESS.

By Antony Ganzitti

Antony Ganzitti spent 5 years working as a professional in the Australian investment industry. His roles included Equity/Options Dealer and Portfolio Manager. He holds a Bachelor of Business (Banking & Finance) and a Graduate Diploma in Applied Finance & Investment. Antony is now a private trader focusing specifically on global index trading, while also keeping abreast of movements in other related instuments. Antony is very much a technician when it comes to trading and believes in the all-conquering theory that price action rules the markets. His interests are candlestick price action, market cycles, Elliott Waves, fibonacci ratios, and market patterns.

© 2010 Copyright Antony Ganzitti - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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