Happy New Year! Quick US30 Update
Happy New Year! I apologize to those following me for the extended break. I got tied up with other things over the holidays and I'm still trying to get back into the groove of things. I have big things planned for 2022, including tutorials, more instruments covered on a more regular basis, and possibly even a YouTube channel coming... but, one step at a time!
I wanted to share a quick update, along with an interesting little statistic about the current market situation.
After the Dow climbed to a new all-time-high (ATH) last Wednesday, it quickly proceeded to sell off on Fed news barely more than an hour later. That sell off produced more than a -2% decline in the index, which is not indicative of a small degree correction. Typically when the Dow falls that much immediately after reaching a new ATH, it takes minimally a week for the price to re-test that high. I say typically, but I'm aware of only 2 or 3 instances in at least the last six years where the ATH was re-tested faster than that after a -2% or more corrective move. All that to say, given this interesting statistic and the current market wave structure, it's hard for me to get behind a short-term bullish scenario right now. An expected interruptive B-wave notwithstanding, I'm anticipating further downside in US30 this week before turning back toward the recent high.
Here's a chart I threw together showing 9 examples of ATHs that were followed by a -2% or more selloff, along with how long it took for the price action in each instance to surpass the high. The two exceptions to the case are in the midst of that sideways mess on the far left, between 11/2020 and 01/2021, when the Dow struggled to continue its climb past the pre-COVID ATH. With those exceptions, the consistency of this pattern can be observed for years. Psychologically (so I theorize), these situations almost always produce prolonged (i.e. a week or more) periods of selloff or consolidation, as a spike or gap up to a new high tends to spook the unconscious herding mentality of investors against re-testing it too soon.
I wanted to share a quick update, along with an interesting little statistic about the current market situation.
After the Dow climbed to a new all-time-high (ATH) last Wednesday, it quickly proceeded to sell off on Fed news barely more than an hour later. That sell off produced more than a -2% decline in the index, which is not indicative of a small degree correction. Typically when the Dow falls that much immediately after reaching a new ATH, it takes minimally a week for the price to re-test that high. I say typically, but I'm aware of only 2 or 3 instances in at least the last six years where the ATH was re-tested faster than that after a -2% or more corrective move. All that to say, given this interesting statistic and the current market wave structure, it's hard for me to get behind a short-term bullish scenario right now. An expected interruptive B-wave notwithstanding, I'm anticipating further downside in US30 this week before turning back toward the recent high.
Here's a chart I threw together showing 9 examples of ATHs that were followed by a -2% or more selloff, along with how long it took for the price action in each instance to surpass the high. The two exceptions to the case are in the midst of that sideways mess on the far left, between 11/2020 and 01/2021, when the Dow struggled to continue its climb past the pre-COVID ATH. With those exceptions, the consistency of this pattern can be observed for years. Psychologically (so I theorize), these situations almost always produce prolonged (i.e. a week or more) periods of selloff or consolidation, as a spike or gap up to a new high tends to spook the unconscious herding mentality of investors against re-testing it too soon.
Comment:
Not sure yet whether to call this B leg complete. Otherwise this prediction has mostly been on track.