Wednesday, March 31, 2010

Big Picture Perspective

Below the DJIA Monthly chart with proposed big picture wave count, retracement and stochastic analysis.

DJIA Monthly

Easter weekend takes me back to the 1980's, "BK" (before kids) days when as part of a yuppie couples community, we used to take these days off and drive down from Atlanta to the gulf coast, the Florida panhandle.  Amid the usual suspects of substances and debauchery, I remember numerous weeks leading up to the Good Friday holiday where the market was running up, my coffers were full and these beach vacations were the best of times.  But I also remember how time and time again, the market would turn right around these holiday beach trips and whether it be a stiff ABC correction or a more serious intermediate decline, the rest of the Spring season was never as sanguine as those days leading up to this particular weekend.

An observation, especially filled  with melancholy memories of simpler, more buoyant times, doesn't constitute a well researched empirical case for a top, but neither can I relegate it to the meaningless nostalgia bin, especially in the light of the above chart.  The wave structure, retracement levels, overbought nature of the stochastic all come together, along with the season at hand, to remind me that big picture bear market view is still out there to be reckoned with in one way or another. 

The Monthly Trend Model is too slow to change to be of trading value here, but the Intermediate Trends, defined by the Daily and Weekly Trends, will provide the first clues that the worst case scenario is unfolding.  Therein lies the beauty of trend following, we need only observe, identify and accept what the market gives us, a lesson decades in the making.


Anonymous said...

Allan, what is Prechter and Neely's view on the current rally ???

Anonymous said...

Well, Prechter and Neely have been dead wrong since last March, so I could care less what they think!

Anonymous said...

Allan,why cant this chart count be 1-2-3-4 and 5 is ongoing....instead of the ABC that you are showing?

how can you call the 'c' a C if theres been a higher high since then.
it clearly looks like
5 waves up. with a target at the 62% fib.

Anonymous said...

Prechter dead wrong since March2009? He called the bear rally in late February. Maybe he was early with his bearishness in Sept '09 and his Jan 19, 2010 exit/dbl short call, but he has always said that he would rather be early than crushed. Bear markets, especially Wave 3 down waves come fast and furious. When the Dow is back below 7,000 will you care much if you exited at 10,600 or 11,250??