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Amateur Investors Weekend Market Analysis (5/8/10)

http://www.amateur-investor.net/Weekend_Market_Analysis_May_8_10.htm

It was a wild week with a 1000 point intra day drop on Thursday which wasn't a glitch as the media is portraying. In my opinion it's a warning shot that things are going to be extremely volatile in the future with wild swings in both directions.

As far as the Dow from a technical standpoint it appears to be developing a potential longer term Head and Shoulders Top pattern with a downward sloping Neckline. Furthermore the 1st Shoulder developed over a period of a few years so it's not impossible we could see a similar choppy pattern develop with the 2nd Shoulder as well if we are seeing a Head and Shoulders pattern developing.



Meanwhile from a Wave perspective the overall pattern looks similar to that of the late 1930's in which the Dow exhibited a 5 Wave pattern to the downside from the early 1937 top to the early 1938 bottom. This was then followed by a Triple Zig Zag correction which peaked right at the 61.8% Retrace from the early 1937 top to the early 1938 bottom. After the Dow peaked in late 1938 this was followed by a volatile 3 1/2 year correction (points Z to A) in which the Dow eventually retested its early 1938 low by early 1942.



As you can see from October of 2007 through March of 2009 the Dow exhibited a similar 5 Wave pattern to the downside. Meanwhile the move up from the March 2009 could easily be interpreted as a Triple Zig Zag pattern which peaked right at the 61.8% Retrace just like we saw in the late 1930's.