Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Dow Stocks Index And The No Mercy Cycle

Stock-Markets / Stock Markets 2014 Oct 01, 2014 - 03:44 PM GMT

By: Austin_Galt

Stock-Markets

The Dow hit an all time high at 17350 on the 19th September and there now seem to be many saying that is it - the bull market is done and the next great bear market is upon us. I disagree. For now, anyway. Let's investigate taking a bottom up approach beginning with the daily chart.


Dow Daily Chart

Dow Daily Chart

The green highlighted rectangle shows the consolidation zone which occurred towards the end of August until mid September. The high of this consolidation zone was a new all time high at 17161 just above the previous July high. This is denoted by the number 1. The low of this area was set at 16937. This is denoted by the horizontal line labelled Support. Shortly thereafter, price shot upwards to a new all time high at 17350 on the 19th September and is denoted by the number 2.

Price subsequently fell hard but seems to have pulled up around the support line. It was a whisker below at 16934 and turning up here creates a little double bottom with the trend. That should lead to one last high. Breaking down below this support line now would look bearish.

A common topping pattern involves three marginally higher highs. This is more obvious when the three highs are all spike highs. However, the first top is often part of a consolidation with the final two tops being spike highs. This is what I suspect is occurring here. We already have the high as part of a consolidation and one spike high. All that is required now is the second spike high (3?).

I have added a Fibonacci Fan which shows some excellent symmetry being exhibited by price. The recent all time high found resistance at the 23.6% angle while the recent low found support at the 61.8% angle. Not to mention several other minor turning points including today where price turned back down right at the 50% angle.

It might be hard now for price to get above a higher angle so perhaps price trades within the 50% and 61.8% angles with the third and final marginal high to occur at the resistance given from the 50% angle. Price trading at new all time highs around the 50% angle in the second week of October may provide a great opportunity to take out short positions near the top.

I have added the Relative Strength Indicator (RSI) and Stochastic indicator which both show the potential for a triple bearish divergence on the next high. Each new high is losing strength. A significant decline could be expected after this next high. However, I suspect that may not be the end of the bull market.

I have added Fibonacci retracement levels of the move up from the August low to all time high. Keep in mind I think we have a little higher to go but not enough to significantly alter this analysis. I will be looking for price to find support after a deep pullback, possibly back to the 76.4% level. After that, there may be one final rally to new highs to finish off the bull trend. At least a test of the highs. Let's see.

As for the timing aspect, the planetary constellations based Bradley Model seems to be currently in-synch with the Dow Jones Industrial Index with the last two major turn dates of 1st January 2014 and 16th July 2014 having coincided with the tops of 31st December 2013 and 17th July 2014. The next major Bradley Model turn date is 20th November so perhaps price goes up into top in early October before going down into that date and then reversing higher once again.

Price trading below the August 2014 low at 16333 would most likely be confirmation the bear market is on.

Now let's look at the bigger picture using the monthly and yearly charts.


Dow Monthly Chart

Dow Monthly Chart

This chart shows the bull market that has been in force since the 2009 low. I have added Bollinger Bands which show price generally staying between the top and middle bands. Only once in more than 5 years did price actually break down to the lower band. Solid stuff.

While price looks to be in a solid position, there are ominous signs elsewhere.

The RSI shows this coming top to be potentially accompanied by a fourth bearish divergence. So perhaps price reverses down in October but then rallies in the following months to new highs and the RSI sets up a triple bearish divergence. That is, the RSI reading on the new high will still be lower than that of the December 2013 high. Time will tell.

The Momentum indicator shows the bull trend has virtually run out of puff. Momentum has been declining since the 2009 high. The game is just about up. Tick tock.

I have added a Parabolic Stop and Reverse (PSAR) indicator which pertains to the dots and retains a bullish bias. Busting the dots to the downside will be one potential sign that the bull market is over. Those dots currently stand at 16085 and will move up to over 16300 for the month of October.


Dow Yearly Chart

Dow Yearly Chart

I have applied the same indicators from the monthly chart to the yearly chart. If the monthly chart didn't give you heebie jeebies, then this chart will surely go close.

The RSI looks to set up a triple bearish divergence on the next yearly top. That top could be this year or next year. If it is next year then price will obviously have to reverse and close the year in negative territory.

The Momentum indicator shows a massive drop from the 1999/2000 highs. It may not appear so going by price action, but this market is struggling!

And yet another ominous sign is the emergence of what I call the No Mercy cycle. This revolves around the 7 year cycle and the No Mercy part of that is set to hit next year in 2015. Let's run through it.

I have shown the No Mercy cycle years on the chart. The last time it hit was in 2008 and we all know what happened then. Before that was in 2001 which was also a negative year after being down around 25% at one stage. Before that was in 1994. This was in the middle of a massive bull market yet this year was only able to eke out a gain of less than 3%. For that type of market, that was a merciless year for the bulls! Price exploded as soon as that year was over. The No Mercy cycle before that was in 1987 - another crash year.

And so we approach another No Mercy cycle year in 2015. I, for one, again expect no mercy for the bulls.

By Austin Galt

www.thevoodooanalyst.com 

Austin Galt is The Voodoo Analyst. I have studied charts for over 20 years and am currently a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts, there seemed to be a dearth of technical analysts. My aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

My website is www.thevoodooanalyst.com 

© 2014 Copyright  The Voodoo Analyst - 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules