March 3rd, 2014
Written by William Kurtz
The Dow Industrials rose to a point above the 78.6% retracement of the decline from its December 31 peak, but that altitude proved to be too much to be allowed - so the Dow was lassoed back into the corral, where it sits right on the 78.6% retracement line.
The S&P 500, the NASDAQs, the Russell 2000, and the S&P 600 SmallCaps posted new intraday Highs today, but the latter three CLOSED lower. The Dow Industrials closed 49 points higher, still well below its December 31 peak.
The Russell 2000 Daily chart shows a "Dark Cloud Cover" Candlestick reversal-warning bar. The S&P 600 Daily shows a "Doji" at the top of a long price advance (Open and Close were nearly the same - 667.78 and 667.33 respectively), which is also a reversal-warning signal.
Friday's Highs may well be the highest Highs that we will see for a very long time.
Things really get interesting when we apply the "magnifying glass" to price action across most of the Indexes from about 1:40 PM until Closing on Friday, February 28. On the three-minute charts of the S&P 500 and of the Dow Industrials, for instance, I can count five waves Down from about 1:40 PM to the Low at about 3:12 PM. ("Five waves Down" indicates the direction of the next-larger degree of trend). From that Low, there appears to be at least the start of a three-wave "A-B-C" upside countertrend partial correction, which looks "short" to my eye. (It has stopped at or near the 61.8% retracement, as the charts show). I could see this correction carrying the S&P 500 back up to the 78.6% line, which would put the S&P at 1863.66, from which point "third waves Down" at multiple degrees of trend could begin.
They are about to get rolling. This will be the largest selloff since October 2007. By the time it is complete, many months from now, the Dow will be at a point below its 6470 Low of March 2009.
My urgent suggestion is that you get your defenses in place without any delay.