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The Declination of the Move

I am a retired CMT (Chartered Market Technician) and I write exclusively here

Way back when in technical analysis school we were taught that vertical moves were the sign of an impending end to a market trend. It does not matter if the move is either up or down. It is that sharp sudden change in direction. The VELOCITY of the move! The one exception is if the market has been listless, flat, moved in one direction for a long time. The investor disbelief that 'something material' has changed, may take several shocks to persuade that: as Bob Dylan admonished "The times they are a changing". Dan Ascani, once postulated in the mid-nineteen-nineties that [market participants were in such a case of denial] "The first wave down may begin with a crash!" Another glaring example: The Dow's blast off in 1982. The vertical move after the gap @ 1020 / the average never looked back.

The chart in question shows three Dow moves over the period of ten years. In each instance it indicates the exhaustion of the accompanying mania: The 'eye balls' /Dot.com rally -which in so many ways was analogous to the high-tech rally that concluded in 1961. In both cases (1961/2001) after the speculative bubble burst a Blue-Chip rally occurred which took the Industrials (Dow/ S&P 500) to their ultimate top. This notion that the bull market that began in 1982 ended in 2001 is ridiculous. Just as the supposition back in the day that the Crash of '87 abrogated the bull run. It did not. The third, in both instances, was a failed rally of dubious technical's that can be best described as a Rabid Run.

The current animal aided and abetted by monetary infusion necessitated by the near collapse of the banking system. In the 1970's: an October mini-crash lay waiting in 1977 after the snap-back rally from the 50% decline. As that was an inflationary epoch vs. the Debt-Deflation of today we can only hope to be so lucky. The specter of the Japanese experience (Nikki down 75%) looms if we are not prudent managers of risk.

S&P500 12-year Chart

The Declination of the Move - a tale of three manias - historical analog 1960's/70's

I hang out at MortiES Premium during the trading day where I provide charts and analysis during the trading day. Mortie has a free thirty day trial going on. Give it a try by signing up: http://www.bostonwealth.net/subscribe-to-morties-premium/

 

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