Dow: Topping Process's Conclusion Confirmed
Sid Klein | Mar 21, 2018 01:58AM ET
This article is Part 2 of the January 2, 2018 analysis; therein, investors' attention is drawn to the section entitled, "Quantitative." However, the following is best understood in the context of the New Year's technical analysis-focused report which, for timing purposes, continues with a brief report using similar analytic techniques.
Per the January report, it would appear that the first quarter has indeed confirmed the topping process in the overvaluation of equities versus precious metals, including the final Wave-5 blow-off in the stock market.
Regarding that final move, the shorter term and less meaningful wave-5 of 5 may yet complete by the first days of April.
Such a move would be extremely similar to the blow-off in 2007 when the Dow eked out a minor high after a smash; as one can see from the plainly annotated chart on p.2 of this paragraph's linked report, after I had identified the July 2007 peak, the Dow did indeed suffer a short term smash (Wave 4), followed by a slight new high in early October (Wave 5), when I again published my prognosis of an all-time high.
This time I was correct about the peak not being surpassed, and that chart pattern is similar to what I am forecasting this quarter a typical movement after a market-unnerving February smash which did not break the long term uptrend, as is evident by the Dow chart below illustrative of a 5-point contracting triangle, the latter being a formation that most typically occurs in Wave-4, which is the final correction before the last move higher (or lower in a downtrend) consistent with today's close having been the end of such a correction, which would precede the last move higher to window-dress the year's first quarter just as consistent with the conclusion of a triangle that precedes the resumption of (an accelerating) move lower.
They key point and bottom line, however, is that the major trend for which one must be positioned is down, and that one should treat any advance in stock prices (and decline in volatility premiums) as conclusive, including the outperformance of global equities versus precious metals.
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