The Great Depression Fractal Part V - The Crash
In my last fractal update, I talked about how we could see continued upside for stocks, but that the top was likely close. I also called the blow-off top well in advance, showing that 30,000 would provide the most likely area for the rally to stop. Guess where we topped out? Very close to that number. Often, we find that true tops are reached in anticipation of psychological barriers. You can see this at the end of 2017, when Bitcoin reached just shy of $20,000 before dropping. Here's the DJI analysis where I speculated on a potential blow-off top around 30,000. This was an entire year ago:
More recently, I discussed why I was skeptical of the recent rally. Hint: It had nothing to do with coronavirus at the time. The virus is merely a catalyst that can expose underlying economic problems. It really could have been anything.
Anyway, I don't have time to write an extensive post on this now, but you can clearly see that the fractal has so far played out, and you can read my other write-ups on the stock market to see my full opinion. Those are linked at bottom. Fractals often don't work out, but I'm just curious to see if this really has any merit. Economically and psychologically, I think we're in a very similar place to where we were in 1929, just not that many people are aware of it yet. In hindsight, I think it may become obvious.
It's very possible that we're about to see a further decline, although from technical standpoint, we might see some sort of bounce. Today, we experienced a bit of a failed low. A relief rally may happen if we don't get any bad news this weekend. Either way, the point of "no return" is really the lows from 2018. If we break through that AND the upper trendline in the orange triangle from the lefthand chart, I believe we will see an extended drop, perhaps akin to what happened after 1929.
What would invalidate this picture would be a strong push well above the 27000 level again, and if the Dow takes out the 30,000 level while also invalidating the bearish divergence on the monthly chart. That's a tall order. I did show 40-50K as a possibility, but as I noted above, 30K seemed more reasonable as the long term top.
That's it from me! This is not financial advice. I am not a professional - just someone who enjoys watching the market. I happen to have a strong visual/intuitive sense, which is why I keep doing it.
-Victor Cobra
More recently, I discussed why I was skeptical of the recent rally. Hint: It had nothing to do with coronavirus at the time. The virus is merely a catalyst that can expose underlying economic problems. It really could have been anything.
Anyway, I don't have time to write an extensive post on this now, but you can clearly see that the fractal has so far played out, and you can read my other write-ups on the stock market to see my full opinion. Those are linked at bottom. Fractals often don't work out, but I'm just curious to see if this really has any merit. Economically and psychologically, I think we're in a very similar place to where we were in 1929, just not that many people are aware of it yet. In hindsight, I think it may become obvious.
It's very possible that we're about to see a further decline, although from technical standpoint, we might see some sort of bounce. Today, we experienced a bit of a failed low. A relief rally may happen if we don't get any bad news this weekend. Either way, the point of "no return" is really the lows from 2018. If we break through that AND the upper trendline in the orange triangle from the lefthand chart, I believe we will see an extended drop, perhaps akin to what happened after 1929.
What would invalidate this picture would be a strong push well above the 27000 level again, and if the Dow takes out the 30,000 level while also invalidating the bearish divergence on the monthly chart. That's a tall order. I did show 40-50K as a possibility, but as I noted above, 30K seemed more reasonable as the long term top.
That's it from me! This is not financial advice. I am not a professional - just someone who enjoys watching the market. I happen to have a strong visual/intuitive sense, which is why I keep doing it.
-Victor Cobra
Comment:
Zoomed in snapshot of the monthly, where you can see how the bearish divergence forecasted the breakdown, similarly to the 2008 recession.
