Dow Stock Index Decline

By: Ed_Carlson

Equities markets have a tendency to change direction following options expiration. Given equities rallied into the end of last week, a downturn can now be expected. It may have started last Friday or perhaps markets will sneak in one final rally on "hope" of a positive outcome from this week's meeting of European leaders on the Greece problem. Either way, a decline is expected. The only question is "how long will it last?"

While no Basic Low (the termination of a Basic Decline) is expected for at least ten months, my Hybrid model was developed to forecast those highs and lows that take place between Lindsay's Basic highs and lows.

In the Hybrid model we look for confirming forecasts centered on both the high of the Multiple Cycle and the low of the Basic Cycle.

On 2/27/07 the Dow exhibited a sharp decline. Although a sharp decline from a flattened top is standard procedure for identifying a Middle Section, in this case there was no flattened top. However, the drop that day was so dramatic as to stand out on even the weekly chart below. It counts 1,525 days to the high of the previous Basic Cycle (5/2/11). 1,526 days later is Monday, July 6.

The search for a confirming Middle Section forecast from the Multiple Cycle begins by counting the days between the Multiple Cycle high (10/11/07) and the forecast from the Basic Cycle (7/6/15). The time span is 2,827 days. Counting back another 2,827 days finds the high of the previous Multiple Cycle (1/14/00)! That high doesn't qualify as a Middle Section but it does create a high-high-low interval to a low on July 8.

Bottom Line: look for a low early in the first full week of July.

Try a "sneak-peek" at Lindsay research (and more) at Seattle Technical Advisors.

Ed Carlson, author of George Lindsay and the Art of Technical Analysis, and his new book, George Lindsay's An Aid to Timing is an independent trader, consultant, and Chartered Market Technician (CMT) based in Seattle. Carlson manages the website Seattle Technical Advisors.com, where he publishes daily and weekly commentary. He spent twenty years as a stockbroker and holds an M.B.A. from Wichita State University.

© 2015 Copyright Ed Carlson - All Rights Reserved

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