If the Dec high was point H of Lindsay’s long cycle (approximately 20 years) as suspected then we can examine past declines from H to I to get an idea as to how low this decline will go. Unfortunately, with only four previous long cycles to examine (since 1921) the sample size is less than “significant”.

The average decline from H to I is 23%. The smallest decline was 10% (1990) and the largest was 45% (1973-74).

If the Dow falls 10% from the Dec high point I will occur near 16,249. If the Dow falls 23%, point I will occur near 13,902.

Expanding our search to include the declines from B to C, F to G, and J to K (D-E and L-M are excluded as they are the terminal declines of multiple cycles and expected to be abnormally large) the average decline is 21% and the smallest decline was 6%. If the Dow falls 6% from the Dec high point I will occur near 16,971.

Reminder: this analysis is only helpful if the Oct low was not point I. The Dow fell 6.7% during Sept-Oct, 2014.

Try a ‘sneak-peek’ at Seattle Technical Advisors.com

Ed Carlson, author of George Lindsay and the Art of Technical Analysis, and his new book, George Lindsay's An Aid to Timing is an independent trader, consultant, and Chartered Market Technician (CMT) based in Seattle. Carlson manages the website Seattle Technical Advisors.com, where he publishes daily and weekly commentary. He spent twenty years as a stockbroker and holds an M.B.A. from Wichita State University.

© 2015 Copyright Ed Carlson - 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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