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Friday, May 22, 2009

Dow Bearline Backtest

I always assumed a major bearline would get backtested and at least a 38% market correction would occur on any kind of (X) wave corrective. Maybe its the DOW backtest that is the benchmark. This chart here shows the kind of correctives that can occur and fool the bears. This move would likely qualify for some kind of huge 5 wave move lower on the SPX (but not the DOW) and get bears to pile on.

But a closer inspection would reveal a triple corrective as I have charted. This chart is not a prediction but I am just trying to show you the potential correctives that could play out a a Minor level and how it can fool the bears.

As I shown in a post earlier today, sentiment is *probably* what needs to correct not necessarily too excessively in price (although it certainly may), however both will likely occur to some degree. Once the excessive bullishness is washed out a bit, look for a move higher. This will of course coincide with the end of any corrective moves such as double or triple threes such as I have shown here. There can only be a triple three maximum and then that is it. That is why the triple three ends in a "Z".

This is in no way a prediction. Just a sampling of how the market can move. I like the backtest though for the DOW. A backtest can occur after only just the double three (at the "Y"). And perhaps it doesn't require a third corrective. We shall see. Its all speculative at this point.

3 comments:

  1. We should also consider a sideways movement. This post from Zero Hedge makes the case:

    http://zerohedge.blogspot.com/2009/05/parallel-spy-channels.html

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  2. I agree Phoevos. I am up for any possibilities.

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  3. me too as long as fed and associates keep taming the bears with its endless money supply.

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