Are you still ready to buy the American market?After working as an analyst for nearly 20 years, I have noticed a clear trend of recovery in all drawdowns in the US market. Money does make money, and the printing press can fill all corrections.
Will it always be like this?
It was this question that made me analyze in more detail the charts of the American indices - DJI and DJT.In fact, you can connect a larger data spector here, including the dynamics of the S&P, the S&P Small Cap 600 index, the S&P Mid Cap 400, index and the Value Line Composite index (geometric) and see the same situations.
I'll add some of them to the graph for clarity.As you can see, there are discrepancies between the charts, which are called intermarket divergences. However, the Dow theory has its own reasons for this.
1. According to the Dow theory, signals about the current trend and trend reversal should be confirmed by both indexes. This statement applies to the Dow Jones Industrial Average and the Dow Jones Transportation Average.
2. At the same time, there may be some discrepancy in the timing of the signals, that is, one of the indices may signal a trend change earlier than the other.
What do you see on the chart?
Personally, I see a notable contradiction. While the industrial index has reached new all-time highs, the transportation index is trading significantly below them. The Value Line Composite Index (geometric) shows a similar picture. That is, we have an non confirmation of the strength of growth and strength of buyers, which is a bad signal!
And no, I'm not saying that you need to sell urgently, but you need to understand that the market is in the final phase of its long-term growth. And a reversal towards the bearish phase is just around the corner.
It is enough to look at the waves to understand that we are already sitting in the last carriage of the train, which is ready to start reversing.In addition, inside wave 5, we had a stretch in the subwave (1), which means that the subwaves (3) and (5) cannot continue stretching.
Wave (1)=18465.79 points, wave (3)=16357.78 points, which means (1)>(3)>(5), then the movement in the basement (5) is limited to the level of 52969.5 points, before reaching it, the market should already begin to show signs of a downward reversal.
At the same time, the 5th waves often give a truncation and already now the subwave (5) = 0.5 of the length (1). The growth may end prematurely if condition (5) is fulfilled=0.618 from (1) or (5)=0.764 from (1).
PS All extremes are usually formed either on euphoria or on general optimism.
Are you still an optimist?
