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Dow 11400 ?
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I try to keep things simple, so for me technically the 50 day simple moving average is considered the threshold of a stock or market, meaning that any stock trading below its 50 sma is in a downtrend. Also if the ma is pointing low the trend is confirmed. The end of the downtrend happens when the stock crosses above the 50 day sma and the average starts pointing up. Since I consider myself a trend trader, and adhere to the KISS method, for now I'm 100% short. In my real life portfolio I don't hold any short funds because of their volatility but since we can't short stocks here, they will have to do.
I'm trying to project an intermediate bottom for the markets using two technical theories, the measured move and the swing rule on the downside. If that bottom is reached I'm liquidating all my shorts and going 100% cash, if my projections prove wrong and the markets break above major resistance and the 50 sma, I'm also liquidating all my shorts and going 100% long. The Dow broke below the neckline of a well defined head and shoulders reversal pattern when it closed below 12725 in the first week of this year. The pullback move carried the Dow to 12743, almost exactly the break down point. The move from the 14093 head to the 12743 neckline is 1350 points. The downside swing rule projects the Dow at 12743-1350= 11393
The measured move theory states that the second leg on a downtrend imitates the size of the first leg after a 30 or 50% countertrend swing. The Dow went form 13450 to 12099 non-stop, forming the first leg of the move. (A - B on the chart). 13450-12099=1351. The countertrend move took the Dow to 12743 ( B - C), that is a 644 point move. (48% pullback). Next leg of the move is projected to C - 1351= 12743-1351= 11392.
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