Heading for Point 15?

193 days until the final high!!

Below again is the basic three peaks and domed house pattern that I do think we are playing out. The little red slash mark between points 14 and 15 is where I think we are. Still a slim possibility that we are only at point 13 or even back at point 11. More below ...

If we are indeed going from point 14 to 15, that means, if this old, ancient pattern plays out, you can count it almost to the day from point 14 to the final high of this pattern at point 23, that being approximately 220 days from point 14 to 23. I say that low at point 14 came in on October 3. So if this plays out as it says, it would be 220 days from October 3, or mid-May. Or, from today as I type this on Sunday, October 30, we have 193 days to go.

I obviously have no idea really if things will play out as the pattern suggests. But I am struck by how the markets this year so far have played out this pattern like a glove. So I'm just going to keep an eye on it. I'll be your three peaks and domed house reporter for you. My next post will be when either (1) we may be reaching point 15, or (2) I no longer think we're going from point 14 to 15 in the pattern, or (3) I don't think we're following the pattern at all anymore.

Rob

Evidence It's Down After All

I've been going back and forth on which way this market is going short term, whether we're on our way up on a long up run, or whether we still have some up-and-down action to go first. I have noticed one pattern that suggests it's down.

Back in mid-September, at the temporary high we had back then, the positive/negative numbers made a distinctive little pattern. First it climbed the ladder up to a very high number, above 3.00, followed by a large drop down to 1.75 the very next day, followed by two more days in that range. Then, to complete this pattern, it jumped back up to a very large number of 3.49 the first day after those three low days, then one more day with about the same very large number, with the high coming at the end of those three low-positive-volume days, and then we had a large fall in the markets into October 3.

So now, this past week, we had the Nasdaq 100 positive/negative number way up to 3.43 this past Wednesday. That was followed by three very low numbers of 1.75, 2.07 and 1.80 for this past Thursday, Friday and Monday, with the high coming in on the last of those three low number days, Monday. So I was very curious today to see whether that number would jump back up above 3.00 in a single day today as it did back in September, which began that month's decline. And we certainly did. That number today was way, way up to 3.91, which I believe is the highest number we've had since the all-time high of 7.25 that we had on May 11.

Just something I noticed. We'll see if we do get that big drop commencing immediately. Whether we do or not, I still think we're playing out three peaks and domed house. Another trip down would just push back that up and down and up and down action of the pattern out a ways, which would in turn obviously push back that final high of the pattern. If I am correct about three peaks playing out, any coming probably large decline will be a buying opportunity. That is a large "if."

Rob

Much Less Positive Numbers Equals Rally

199 days to the final high!!

I had said in my last post that I thought it looked like we were going down again because the Nasdaq 100 positive/negative number had gotten up to where we had topped out the last couple times, which was 3.43. But just showing how fast things can change, making my short-term predictions pretty worthless, that 3.43 number dropped all the way down to 1.75 the very next day, which is exactly the number we've gotten down to when the last couple rallies started. And the result is the large up days on Friday and today (Monday). So now it looks more than ever like we have begun the largest up leg of this long move up, assuming we are in fact playing out the three peaks and domed house pattern, which I'm pretty convinced that we are. At a minimum, if this is that big move up, we have to move above the previous highs in most areas of the market set last April. Keep in mind that I'm not ruling out one final move back down to the lows from here.

If we are taking off on the big step up, then we could possibly have a way of counting almost to the exact day of when the all-important final high will come in. I don't know how accurate it is at all, not at all. But I do know the three peaks and domed house pattern is a classic standard in the pattern business. And if you'll go back two posts in my blog, you'll see that from the final point before the big move up, all the way to the final high in the domed house pattern, is listed as 7 months and 10 days. If we are playing this pattern out, that low before the big move up came in on October 3. So then I wonder how you count 7 months. Calendar months? I'm going to count a month as 30 days, multiply it by 7 months, plus 10 days, equals 220 days. So we have 220 days from October 3, 2011 until we might be having that final high. I'm not forecasting that at all. I've never watched this pattern before and counted the days to see if it is accurate. I'm just watching out of interest. And just for fun, I'll post how many days remain at the top of my blog. I believe there is a very good chance it will happen, just because I'm amazed how accurately we are tracing it out right now.

That would put us in the middle of May, well before the presidential elections of 2012. Republican candidate could be looking good by the fall.

Rob

Looks Like Another Trip Down

I was hopeful that we were done with the up-and-down stuff and were ready for blastoff, but I'm afraid it looks like we're heading down at least one more time. I say that because my Nasdaq 100 numbers show that people are still too eager to jump in on the positive side. Our high in mid-September before we had a large move down into the first of October came in with the Nasdaq 100 number at a positive 3.49. Then at the low we had come down to 1.75. Since then the markets went up and up, with the positive/negative number staying around 2.50 to 2.75. Then we had our little up and down of the last few days, and that number jumped back up to 3.43 today, almost exactly where it jumped up to in mid-September. So, as I said, I think we're going to get spanked a bit here in the next week or two. Hopefully people will be scared enough by then to not jump on the bandwagon so quick and we can get an extended move up. I would expect about the same move down as we had in September, where the Dow lost about 8%, the Nasdaq lost about 9%, and the Russell 2000 lost about 11%, or maybe a little less.

If we do go down about those amounts, I think it will be a good buying opportunity, because the next move up could be a big one.

Rob

Still Looks Like 3 Peaks Pattern

Below is my charting of the markets through a couple days ago. The red line is the Nasdaq 100, which I think is doing the best job of tracing out the three peaks and domed house pattern that I still believe is being traced out. In fact, I'm more sure of it than ever. Beneath the market charting is the old familiar basic chart of the three peaks and domed house pattern. I think they are strikingly similar in may respects. These patterns never play out perfectly. But much of this is darn near perfect. Now that we have gotten into the area of point 10 to point 14, things have gotten a bit harder to figure out. I think there are three possible scenarios. Remember, this is playing out best in the Nasdaq 100, the red line. Other parts of the market, most notably the black line at the bottom which is the Russell 2000, have gone to lower lows, which is not what the pattern shows. But you'll see that we had the low in mid-August with the red line and it has never gone below that low, in keeping with the pattern. I'll continue my narrative below the three peaks chart.

So I think the three possibilities are:

Most likely possibility in my mind is we have completed the up-and-down stuff between points 10 and 14 and are now heading up on a great run up to point 15, notwithstanding today's large down day.

Second most likely scenario to me is that the high on Friday was point 13 and we are now turning down to point 14. If so, I would expect parts of the market to go to still lower lows, scaring people to death, while the red line stays above its mid-August low.

And the third possibility, least likely to me, is that the high on Friday was point 11 and we have some up-and-down stuff to go which could last a while and be very scary as much of the market goes to lower lows and then still lower lows.

One interesting thing that happened with today's very large down day was that there was a pretty substantial increase in the negative money in the S&P 500, which I do think is KJ ("Knee-Jerk") jumping in on the negative side, although with only a portion of whatever money he has left, not all of it. But still, this would mean KJ actually won for a day, which usually means something is up. And that something could be we're getting ready for that nice run-up of the first possibility I mentioned. He's obviously not going to get out of his negative position after winning. He'll probably throw more money on the negative side, would be my guess.

So I'm curious to see where we go from here. I'm especially curious to see if the KJ theory is correct, that when he wins, something is up. But whether we go up from here or we're only at point 11 or 13 and are going to head down from here, I still think we are tracing out three peaks and a domed house, which means we will eventually have one heck of a nice run that it would appear would run right up to the 2012 election or beyond.

I read somewhere recently that there is more short interest now in the stock market than at any time since the lows in 2009, and you've seen the nice run-up we've had since then. I'm personally staying long, and I'll be adding to my long position if we do head down, maybe a little each week, something like that.

But then again, I could always be totally wrong.

Interesting fact: The Dow is up about 50% since Obama took office on January 20, 2009. That's 50% in less than three years. What's everyone complaining about? The people who talk about jobs are just using that as something to complain about. They don't care about the unemployed. The jobs all went to China. What's the president supposed to do, lower the minimum wage to $1.50 to compete with the Chinese? They gripe about the bailouts, as do I. That was the Fed telling the president what to do, and any president, Republican or Democrat, would have followed the Fed's advice. The largest part by far of the big increase in the national debt came from the bailouts. If the market does trace out three peaks and domed house and we go shooting up, I wonder what they'll bitch about then. Should be interesting.

Having said all that, I still think some sort of crash is coming, which is the final part of the pattern. And I think it will be a monstrous crash because of that 7.25 positive versus negative number we had last April. We've never really come close to going down to where I think we need to go to get to the needed doubt numbers to have a real low, which is the Nasdaq 100 numbers going negative. It has to unwind eventually. The question to me is who will be the president that gets stuck with the bag.

Rob