Wednesday, March 18, 2009 1:27:48 AM
Hi JRP! I like your work. I also realize how difficult it is to capture the transition 3 ->4 on a 60 min chart of the DOW, where manipulation is so easy, via fabricated news, on a few beaten stocks. That is why I adopted an “out of the box” strategy in charting this index, for longer time units. I will show 2 charts of mine, previously posted on the SPY BOARD, on March 8, with their original commentaries. When one reads them now, it is obvious that I was panicking…
Chart 1 : monthly.
I usually love to show charts and I am pleased when people like them. But this time I am not happy to post the monthly chart of the DOW Industrial index in the post-WWII years.It simply fell of the cliff. Being a “diligent swinging bear” does not make me happy any more. We are now at a critical point: a projection of an inflection point from the past (Nov 1996) when the DOW was 6600. Why am I worried ? Well, you have heard the Talking Heads and their invited pundits talking about such points - but they are talking nonsense. Let us first clarify this notion:
The point of inflection (or inflexion) is a point on a curve at which the curvature changes sign. In terms of functional analysis (in a simplified way) at that point the second derivative, f“(x), is equal to zero. It is also a point on a curve at which the tangent (red vertical segment on our chart) crosses the curve itself.
Why is that significant? Because - in terms of herd psychology - this is a point where the excessive desire to buy or sell a stock (or index) starts to get buffered by adversary market forces and increasing individual doubts . Functional analysis captures this transition. Now, here is the big Question: is such an event going to be “imprinted” in the market’s memory so that its projection in the future could become a significant landmark? In my opinion it is better to consider it than ignore it: “The present never repeats the past…they only rhyme…” - said a famous American. Briefly, I hope we will go up from here! It is not a funny bear market any more…We hope to keep our civilization alive. If you really believe in it, pray for it!
Chart 2: weekly, is now brought to date. But at that time I wrote:
A closer look at a weekly chart might lead to a surprising conclusion. Starting with March 05, the rise of the DOW was contained between two ascending arcs. The downturn which we all now consider dramatic - in retrospect - happened only after a series of neurotic moves that took place within a zone of congestion (red dotted rectangle), well protected under a “dome“ engineered by a slowly down-turning channel. In October 07 we reached the highest point of this “extended flat”. Later, an impulsive down-move was contained in a well defined parabolic segment which we might call for simplicity a ”pregnant channel”. The transitional geometry of the system suggests that it will now morph into a new flat - a mirror image of the one that occurred at the top of the curve. This flat could be initiated by an UP corrective move.
Chart 1 : monthly.
I usually love to show charts and I am pleased when people like them. But this time I am not happy to post the monthly chart of the DOW Industrial index in the post-WWII years.It simply fell of the cliff. Being a “diligent swinging bear” does not make me happy any more. We are now at a critical point: a projection of an inflection point from the past (Nov 1996) when the DOW was 6600. Why am I worried ? Well, you have heard the Talking Heads and their invited pundits talking about such points - but they are talking nonsense. Let us first clarify this notion:
The point of inflection (or inflexion) is a point on a curve at which the curvature changes sign. In terms of functional analysis (in a simplified way) at that point the second derivative, f“(x), is equal to zero. It is also a point on a curve at which the tangent (red vertical segment on our chart) crosses the curve itself.
Why is that significant? Because - in terms of herd psychology - this is a point where the excessive desire to buy or sell a stock (or index) starts to get buffered by adversary market forces and increasing individual doubts . Functional analysis captures this transition. Now, here is the big Question: is such an event going to be “imprinted” in the market’s memory so that its projection in the future could become a significant landmark? In my opinion it is better to consider it than ignore it: “The present never repeats the past…they only rhyme…” - said a famous American. Briefly, I hope we will go up from here! It is not a funny bear market any more…We hope to keep our civilization alive. If you really believe in it, pray for it!
Chart 2: weekly, is now brought to date. But at that time I wrote:
A closer look at a weekly chart might lead to a surprising conclusion. Starting with March 05, the rise of the DOW was contained between two ascending arcs. The downturn which we all now consider dramatic - in retrospect - happened only after a series of neurotic moves that took place within a zone of congestion (red dotted rectangle), well protected under a “dome“ engineered by a slowly down-turning channel. In October 07 we reached the highest point of this “extended flat”. Later, an impulsive down-move was contained in a well defined parabolic segment which we might call for simplicity a ”pregnant channel”. The transitional geometry of the system suggests that it will now morph into a new flat - a mirror image of the one that occurred at the top of the curve. This flat could be initiated by an UP corrective move.
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