Tuesday, April 8, 2014

A Funny Thing on the Way to a Correction

by Greg Harmon

While everyone has become bearish waiting for an extended pullback in the Nasdaq and Russell 2000 to drag down the S&P 500 and Dow Jones Industrial Average ($DJIA, $DIA), the Dow has not made a new low yet. Not even a short term new low. It might happen today, or it might not. But either way there are certainly not many that are putting any money behind the AB=CD pattern that has been playing out. Since the October low the Dow has moved to a high at year end and pulled back in early February defining the A, B and C positions leaving the D at 17209.51 around April 30th. 1000 points in 3 weeks seems like a lot, but the time element of the AB=CD pattern is not strict. But are there any catalysts that could move it like that? Hmmm, earnings season starts tonight. What if earnings beat expectations across the board handily?


There is a FOMC Meeting April 29-30. What if they decide to taper the taper? I have no idea if these catalysts will move the market or something else or nothing. But there is a lot of weight leaning over the rail on one side of the boat right now. I will not be convinced that the end is coming until they tip it over and sink it. A move under 16046.99 would get me putting on my life vest and under 15340.69 searching for the life boat. Until then it has just broken the 20 day Simple Moving Average and is a mere 2.4% off of the all time high. I am not broadly buying but I am not selling either.

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