Monday, February 16, 2009

DoctorMad Update - Swinging Through the Low Countries…

The General sees some potential weak spots in the bulls defenses. Futures are moving lower as I type.

Thanks for sharing your work, Doc! Not to unduly influence… but I like how clean your charts are… I think they’re “cool” - great job!

Looks like the bears may be following the German strategy for defeating the Magninot Line (800 SPX) with a swing through and around the heavily defended line via the low countries (Asian and European Indexes that are set to get slammed) breaking 800 while our cash market is closed. Now they still have some work to do, but the follow up to the late day dump is not encouraging if you’re a bull sitting in the 800 trench. Break 800 or gap down below it, and like the Germans, you could be in Paris (sub 700 SPX) in very short order.

I do have a potential wave 2 channel still in play and this could all be part of the B wave. Thinking a little further out I'm still comfortably bearish as long as the yellow wave 3 channel and especially the big blue wave 5 channel continue to hold their downward momentum.

I'm also including a couple of longer term charts showing the major yearly and weekly momentum channels. The big peach channels containing the yearly moves are a derivative of the 120 year chart illustrating how the market alternates between multi year up channels and multi year flats. Like all the smaller channels these yearly channels and waves formed within them follow the same rules. The beginning of each channel is laid out by the wave points marking the end of the previous channel. You do have to do a little log scale work to look at the yearly patterns in the past but in many respects the set of channels defining the last 20 years look much the same as the sets that defined other decades.

One more thing to keep in mind for next week is there hasn't been a weekly close below 800 in over 10 years. The Maginot Line has held on the weekly both throughout the tech bust and the credit bust bears so far.

I also have a question for the 3 or 4 people who follow my work… Would you prefer if I hide old smaller degree channels once they are no longer in play or keep the deluxe version with all the channels shown?

Please vote “funny” for charts that include the old channels…

Or vote “cool” for the chart that removes the old channels…