my friend, fellow chartist and trader gave me the chance to do this post on his blog as a “guest blogger”
at the time, I was watching, extremely closely, the “standard” .618 price projection and it’s importance due to using the all time low from 1896 at 28.48. the market opened/closed in and around this level for roughly 5-6 months an then exploded higher.
one of the lesser know price projection techniques is actually based on the equal octave scale of music. this is NOT going to be a diatribe about musical theory, if your so inclined see a website like this: http://www.phy.mtu.edu/~suits/scales.html . as a trader, I know the musical note ratio’s and I also have some fundamental understanding of the importance of square roots and their inverses and we’ll leave it at that….
so, if we take musical note F# ratio of 1.68179 and then subtract 1 we get .68179. that is the multiple that we project from and that nails the recent high and also intersects the expanding triangle that is bearish. (1.618-1 = .618)
stay tuned and as we’ve been saying for a while, things certainly seem to be adding up ….
Abstract: The moral stated at the end of the Greek version is, “this shows how liars are rewarded: even if they tell the truth, no one believes them”. It echoes a statement attributed to Aristotle byDiogenes Laërtius in his The Lives and Opinions of Eminent Philosophers, where the sage was asked what those who tell lies gain by it and he answered “that when they speak truth they are not believed“. William Caxton similarly closes his version with the remark that “men bileve not lyghtly hym whiche is knowen for a lyer”.
DOW JONES COMPONENT SUMMARY: this next week will mark, yet another, very important point in TIME for market to heed. As seen below, targets and patterns are/have completed (ing) and let make one thing clear. I am not personally tied to what the patterns are objectively showing. So, I never have nor ever will “lie” like the fable states above. I am simply stating the patterns are showing SELL patterns and as one who has said this before, it’s a very very precarious market. But, w/ full disclosure I have been saying that for a while and the market keeps exploding higher. So, I could be construed as “crying wolf” so to speak.
enjoy the charts and thanks for the comments, questions …
one last — W O L F !!!!!
DOW JONES TRANSPORTATION INDEX: the low on this index was formed before the Industrial average was 45.59 on 10/29/1896. when we go back into such long time frames we need to let the charts check the validity of this node in time/space. Using this low of 45.59 we find that it held the .382 retracement of the 1987 crash, the .5 retracement of the 2000-2003 low and the .618 (exact OBTW) retracement of 2007-2009. additionally, as shown by the orange arrows, the “thunderbolt” or “ab=cd” move was exact in resistance at 5537 in 2010 and almost the cause of the 2007 top. W/ those as our reference points, I believe we can objectively say that we have a good “node” to work from …
the purple arrows are “basic” measured move projections that smack right into an extension pattern in/around 7600. Additionally, the lighter blue arrows come in around 7535 on the index. I expect those to be MAJOR resistance areas if not the TOP. At a minimum, an expectation of a 3500 point decline from those areas (simply the size of the last one) is to be expected.
if we take a look a current levels – 7211 close (and note, closed at the highs) – then another 300 point move or, roughly, 4 percent move isn’t out the question. expect higher next week into this area of EXTREME resistance.
DOW JONES UTILITY AVERAGE: the Utilities Average has a sell pattern appearing a little higher after a very big monthly sell signal. while the pattern from the all time low in 1942 is still alive, it will be extremely important to watch this SELL pattern coming into play. If we fail at this SELL pattern then an attack of the “still alive” target up around 570 could be a reality. either the SELL pattern or the “still alive” will/should stop it in it’s tracks …
DOW JONES INDUSTRIAL AVERAGE: back before posting, JC Parets allowed me to “guest post” (thanks) on his site using the all time low on the DOW and our former 2007 top. (http://allstarcharts.com/the-math-behind-historic-dow-charts/) that level was, essentially 15,300 and the DJIA has been bouncing in/around that level for almost 6 months. that is what THE long term .618 price projection should do – if not be a top or bottom. but, last week, it gave away and the DJIA took off. folks, what we potentially have here is a 5 point reverse way pattern on a monthly basis. IF CORRECT, the bearish implications are very powerful. trend line resistance exists a little higher, we have a 1.27 extension pattern at 16,308 and the “top of the circle” at 16,827. I know the “top of the circle” will have people scratching their heads but LOOK at what the bottom of the circle did the last time we were EXTREME in bearish emotion (2009). It, basically, nailed the bottom. Would seem natural that the top would do the same…correct?
Bart out …