iGoddard
Short

DJI: a possible future path

DJ:DJI   Dow Jones Industrial Average Index
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It looks like the Dow is in a progressive sawtooth crash, and with trade-war fears not likely to abate anytime soon, who knows how low this can go. Here I show shorter and longer-term support (defined as a linear trend touching lowest lows). 2017 seems to mark the onset of a parabolic movement that's now crashing down, so it's not beyond the realm that the parabolic bubble will burst, taking the Dow down to its 2009 - 2015 support level . The DJI has already lost all of the bubble's 2018 growth, and then some.

The 2017 parabolic movement may have all been anticipation of economic stimulus under Trump's anticipated pro-business policies. But counting one's chickens before they hatch is not a sure thing. So we may be seeing estimate corrections upon realization that Trump is a mixed bag. Even if his trade-war plans bring future growth to US businesses, in the interim it may have non-trivial consequences for equities.
Comment: Not bad! The very next day DJI pops dramatically, forming the start of another spike, as I proposed...

Let's hope it's not another dead-cat bounce. It's soooo easy to be lulled into believing we're back on an indefinite roll, back in the saddle again. What could possibly go wrong! Well, given the track record of late, almost anything could go wrong, talking heads might even be scratching their heads trying to figure out what went wrong after the fact. So there's still every reason to restrain optimism and exercise caution.

If this upward movement follows the pattern, it will crash soon because each saw-tooth spike has failed to regain the height of the prior saw-tooth peak. Moreover, the upward slope of this movement is too steep to be 'real', which is to say it's the sustainable slope of a bull run, it's still part of the fear-mania volatility we find ourselves in and I suspect that won't soon vanish.
Comment: I wrote: "which is to say it's the sustainable slope of a bull run..."

I meant: which is to say it's NOT the sustainable slope of a bull run...
Comment: So far the Dow has been following my next-spike up like a script...

Let's hope it fails to follow the downside! Next I'll post a close up...
Comment: It's almost spooky how the green curve I drew is like a trellis the Dow vine is climbing...

But I hope my prediction falls apart next week with indices steadily climbing!
Comment: Unfortunately my least optimistic prediction is engraving itself into reality a little more every day...

At this point I think the market is going to fall further before it recovers. I'm inclined to say the wise investor has cashed out. Scrolling back through the available history it's hard to find another case among indices where a series of lower lows and lower highs marks the bottom of a downturn. Almost with certitude it marks the edge of a cliff whose bottom is yet to be found. :(
Comment: The Dow's course remains locked within this bearish model. It burst upwards through my 'another spike' only to hit my maximum-upward limit like it was a solid-concrete shell, then ricocheting off it back downward, hard...

Noteworthy is the view of famous investor Jack Bogle, who says this is the most volatile market he's seen in his 66-year career. Reviewing other rough spots, what strikes me as outstanding about the current turbulence is not so much any one downward movement but the continuity of many dramatic falls and rises.

The upward movements are as infected with the 'volatility virus' as the downward movements, tracking upward slopes far steeper than representative of a healthy sustained bull run, ie, they are unsustainable upward movements. Investors are both selling and buying in panic mode. Will the market just smooth out and return to bull, or does it foretell a recession?

https://www.marketwatch.com/Story/bogle-says-hes-never-seen-a-market-this-volatile-to-this-extent-in-my-career-2018-04-05
Comment: The Dow has effectively bounced off my bearish dome three times

yet to push through. But there's also an indication of upward trending with a couple higher lows. So maybe momentum is building to break out and up.
Comment: Looking like Support 2017 held and we're rebounding thereoff!!...

Fingers crossed!
Comment: Carving out a bullish channel...
Totally agree. Nice analysis.
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iGoddard tipere445
@tipere445, thanks!

At least the magnitude of this dip so far isn't dramatically greater than other dips post-2009.
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