Note the long TL at bottom reaching back to 1996. Scroll R/L to see the extension. IMO this line will define the bottom for the 2020 bear market.
Note the two-year 'Trump' TL which has enjoyed a parabolic run-up since election and corporate tax cuts. This curve is unsustainable and will drop back to the long TL, sooner than later IMO .
NB: The 2018 Correction and subsequent Bear Market Rally have produced a pattern on grand scale going back to Jan 2018 (triple tops charted under umbrellas).
In shorter perspective, US 30 is in a down trend since 25 Feb, when it made a lower high around 26240. It's trading well below that now, after rejection from the TL formed by highs of 03 October, 25 Feb (X-X TL). Small arrow over 19-26 March period shows stair-step of lower highs. candle on 22 Feb was extremely ominous; a clear sell signal, provoked by rate inversion, a highly reliable indicator of recession. According to WSJ on 3/24/19, the yield curve has inverted before each of the past seven recessions.
Nice article on what it means exactly and why it happens; essentially; bond investors' demand for long-term notes has driven their yields lower, as confidence in short-term paper falls, given an expectation that future paper will pay less: https://www.thebalance.com/inverted-yiel...
"Price shock" on Friday 22 March occurred on/about Spring Equinox, a period often marked by trend changes. This arrived after a three-week rally following a brief decline from the 25 Feb high, a date 61 days from the 26 Dec trend change; significantly:
In "45 Years on Wall St" W.D. noted;
"Rule 4: Buy and sell on 3 Weeks' reaction or decline... in a Bear Market sell on a rally of three weeks after you know the trend is down... After a market rallies or declines more than 45 to 49 days, the next time period is around 60 to 65 days, which is about the greatest average time the a Bear Market Rallies, or a Bull Market Declines."
"Rule 8. Time Periods; Dates for Changes in Trends: ...March 20 to 27th. Sometimes major tops or bottoms occur around these dates."
General observation: following a Price Shock, the market may Rally for 3-5 days before the Down Trend resumes in earnest. When these Rallies are rejected from a TL, the resulting reaction can provoke Panic Selling and Capitulation. Look back at Jan 29 Jan to Feb 1 and 3-10 October periods, where brief consolidation occurred just before Waterfall Selloffs, following the initial Price Shock.
Of the past 11 corrections of 10+%, 9 have produced double bottoms. Of the past 13 Bear Markets, only 7 have correctly indicated the arrival of a recession. The market is a lousy forecaster! But, this means that 46% of Bear Markets occur without a recessionary environment...!
WXYXZ patterns depicted only suggest a possible path, this is of course completely unknowable, as predictions are always hard to make, especially when it's about the future!
If you scroll back to Feb-June 2018 there are two 'M' patterns with the WXYXZ path. Although the markets could simply roll over and throw down to a , IMO a complex pattern is more likely, given the titanic struggle with Bulls & Bears ongoing.
I do not pretend to predict the course of US 30. However, it is apparent we are in a Down Trend; the index has rejected from the X-X TL and is rotating lower as it gets Mark-Down. The possibility of a severe Secondary Correction with Capitulation Panic within three months is quite real.
Note that the X-X TL intersects the 1996 Long TL at price 17,734... this nearly coincides with support back to 2015 around 18,023. Expect eventual bottom formation around Dow 18K.
Risk in US Equities is very high now. Prices are within 85% of ATH (All major indexes reached and turned back from Fibonacci 8:55 ratio = 0.85455). It would be prudent to exit long positions and preserve capital. Speculate on price mark-downs at your own risk!
That being said, I've taken Positions in: SDOW ; SPXS ; TECS ; SPY 282 May Put; QQQ May 180 Put. Growl!
NB: This is not investment advice; just my own speculative idea; trade at your own risk! GLTA!
Iinteresting perspective on yield inversion:
Equities are at critical juncture, will either turn back and tank off, or be trapped in range-bound trading; or breakout and move to ATH. Let's be patient and cautious. Do not plunge big positions either Bull or Bear!
The high gap up +150 to open smacks of an exhaustion gap. Very thin volume going up and heavy red selling bars to run the gap back down in the early session, then light volume again on the PM lift.
Insiders waiting for higher prices to distribute their shares... Expect a bit higher Monday and watch to see if it gives us a shooting star. Would be setup for a Graveyard Doji; if we see it, it's a clear signal.
Futures jumping on trade optimism without any news or deal. Hangs on the crest of right shoulder:
Gann observed in 45 Years In Wall St:
"Important dates for change in trend include March 20 - 27; April 7 - 12, and 20-25; the latter part of April is quite important as chnage in trned; May 3-10 and 20-28; the changes in May are second only in importance to those of Jan & Feb, and many major Tops and Bottoms have occurred around these dates, and and change in Trend has taken place."
Rollover will occur between 01 April - 28 May. Prices could get a bit higher, particularly if a trade deal with China is negotiated soon. GLTA!