In looking over the index charts today I did find something that is likely very indicative and could be "the" clue to the week and to the market in general.
Here is what I found:
The DOW is on the 5th rally wave since the uptrend started on Mar09 and using the Eliot Wave Theory, it means the top of the long-term uptrend could be at hand #$%$ waves is usually all that is seen before a major correction or new downtrend occurs. In addition, each wave has been weaker than the previous wave with the first wave rally which started on March 2nd 2009 being 4789 points, the second wave being 3262 points, the third wave being 2618 points, the fourth wave being 1618 points, and the current wave being 1424 points so far.
It should also be noted that starting from the top of the 1st wave seen on Apr10, the high to high rally differential (from one rally top to the next) has also been coming down with the first one being 1618 points, the second being 462 points, the third one being 323, and the current one, using Friday’s high at 13895, has been 234 points so far. As such, the Eliot Wave theory does suggest that the index will not rally much more above Friday’s high, certainly not above 13984, as that would make this top to top rally higher than the last one.
I do believe this is an important fact that will be seen and used by the traders this coming week.
I cannot yet say that the 13984 level will not be broken as the DOW came within 15 points of that level yesterday and is only trading 30 points below that level today. Nonetheless, the bulls have had every opportunity to break that level the last 4 days and so far it has not happened.
The GDP number came out negative this morning and though the traders have not reacted to it yet, probably because the momentum to the upside has been almost overwhelming, the reality is that a negative GDP means no growth and in a market that is at such a high price, considered to where it has been the last year, it is almost impossible to believe that people will continue to buy with NO GROWTH in GDP.
I dont believe in this theory. Its correct that a pull back / correction might come, but that depends also on the market news. So, if we still will get some good earnings reports, the market will continue its upside trend. If no good news, then the correction will come.
If you do not believe in the Eliot Wave theory, which by the way has been confirmed countless of times in the past, how do you explain the fact that each and every rally has been smaller than the previous one over the past 3 years. Why weren't any of the previous rallies bigger than the previous one?
Here we are with the DOW having rallied 243 points above the previous high top and if the DOW rallies another 89 points it will break the lower top to top sequence. Nonetheless, that sequence has not been broken even once during this entire rally from the 6469 low.
Explain that please.
If you are right then the DOW should rally strongly again this week. Last week it rallied 273 points and closed on the highs of the week, meaning that 89 points should be easy to do this week.
Keep a close eye on that and maybe you will learn something about technical trading and those that do it in a big way (Hedge and institutional funds using computers). .