Small Bearish Gartley Pattern in the DIA Setting up a Very Bearish Scenario

A small bearish Gartley Fibonacci pattern has been identified in the DIA ETF (the ETF that tracks the Dow Industrial Average) and it could be a key factor in how the market structure develops into the end of this week.

There are only 4 days left in March 2014. So that means end of Month and end of Quarter and one has to consider the possibility that a little 'upside tape painting' would be logical to occur for a few more days into end of this week. This is interesting because if this small amount of upside tape painting occurs, it would help the set up of this potentially bearish Gartley Pattern in the DIA ETF.

DIA ETF Daily Chart March 2014 DIA ETF Daily Chart March 2014
As one can see from the chart, this very small potential bearish Gartley pattern is projecting 3 potential reversal zones between 164 and 164.40. The proper way to asses whether or not such a Fib pattern is going to work is to watch price candlestick action as it moves into the potential reversal numbers. When and if the numbers are hit, then one must try to focus on the candlestick price behavior for clear signs of reversal and then confirmation that a new bearish leg wants to engage. This signal can come in the form of a candlestick reversal pattern (for example shooting star, doji, gravestone doji, gap up and then full bearish engulfing candle, hanging man candlestick etc etc.).

Just to be clear, the discussion centers around daily price bar signals and interpretation.

What I have seen in the past is that sometimes the situation occurs where a small Fib pattern nails the top or bottom in a stock or index. During my scanning over the years of previous market tops and bottoms I have seen some market tops get nailed quite precisely with a Fib reversal pattern. Sometimes they are precise, and other times they work on a slight delay factor. For example in January February 2009 there was a bullish Crab Fib pattern that was setting up and it was indicating a reversal in the sp500 near the 750 zone. As it turns out that level was only about 7 days and about 75 S&P points away from the final market bottom on March 9th, 2009.

So now we have this very small bearish Gartley pattern in the DIA that is suggesting to watch the 164 to 164.44 zone for reversal potential. Ideally we would drift up there into the end of this week and maybe finish the week with some type of doji or shooting star candlestick.

Sometimes these Fib patterns do not result in price moving up into the reversal zone and instead price reversals down fast very swiftly before any of the aforementioned levels are tested. In fact sometimes they are never tested and the market or stock just reverses earlier. So one has to be open minded. The market may reverse down hard at any time this week.

The week that starts next week is very key because I am relying to a certain degree on Marty Armstrong's model which says it is slated to be a panic cycle week.

The fact that March 31st next week is slated to be a panic cycle week is very interesting to me because of the current context of this small potential bearish Gartley reversal pattern. The pattern makes it quite clear that there is a small window more of price advance, but after that we should start to head down. This fits in very nicely with the timing of the beginning of the Marty Armstrong panic cycle week to start on March 31st 2014.

I would also suggest that one take a look at the price structure and the MACD for the period up to July 22, 2011. The sp500 made a small double top at that point and it resulted in the daily MACD moving into a bullish crossover. It appeared precisely on that date that the market was ready or pretty close to breaking to new highs. But yet it was still below previous peaks as is the case in the current market action over previous several months.

This move into a double top ended the market advance in late July 2011 and then the market plunged for an approximate 15% decline for about 15 trading days. The decline was persistent and was cascading in that we see price candlesticks that were increasing in size as the move continued.

The decline that began from October 2, 1987 lasted about 12 days to the panic low. 12 to 15 trading days is essentially 3 calendar weeks. So if we project out 3 weeks from March 31st next week (the week that is supposed to start the panic cycle) then we get close to the April 20th to 21st cycle magnet date.

So one can see how a potential scenario is developing right now where the market drifts around a bit more this week waiting to show a serious sign of weakness to the downside. If and when this kickstart move to the downside begins, it could very well be the fumes that lead to the fire of a major market downside move into April 21st.

I keep mentioning this April 21st date and the Marty Armstrong March 31st week panic cycle date. I want to be clear that I did not come up with those dates but I am relying on my sources that they have strong potential to lead to highly volatile market action, perhaps even crash type market action.

By the way I do find it quite odd and unusual that this supposed April 21st Astro date is also Easter Weekend and April 20th was Hitlers birthday. I will let you try to come up with an interpretation of what that means, but the bottom line is that April 21st date something 'huge' is supposed to happen or at the very least it should be a key market magnet date (either a high or a low). At present I am unable to see how April 21st could be a major market high, at least for now. Certainly anything is possible with the market, but everything I am looking at right now suggests it will be a key low.

The US Dollar continues to show probability of making a solid bottom and a ferocious upside rally. The Bonds TLT ETF also looks like it is in a stance to skyrocket. These two factors are also consistent with a downside market move.

The VIX right now is basically like a rubber band at full tension and is being pushed on time and time again and yet it fails to budge any more to the downside. That tells me when it is finally ready to get a rally going to the upside, it will move very swiftly to the upside with pullbacks being modest and contained.

The McClellan summation index continues to be in a bearish stance and show more downside momentum despite today's market rise.

I am looking to go 'all in' short this market, but am presently on the sidelines. I am awaiting confirmation and want to give the market a little more breathing room to the upside.

If one looks at certain individual stocks such as IBM or JPM one would think we are ready for another huge upside leg in the market. However on some of the strong DJIA Stocks such as CAT and MSFT there exist bearish Fib pattern setups that could halt their advances in short order. JPM also has several bearish FIB patterns that suggest it's advance will be stopped soon.

If the scenario starts to show confirmation we should start to see serious persistent downside price action in the DJIA and sp500 starting sometime this week or very early next week. Then, once initiated, the target resolution for the low would ideally be near April 21st 2014.

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19 comments on “Small Bearish Gartley Pattern in the DIA Setting up a Very Bearish Scenario
  1. Joe Soja says:

    Did yesterdays price reversal off the first hour
    high just above 164 in the DIA,
    sure looks like the reversal candlestick bar you
    were anticipating.
    Excellent analysis !
    Thank you.

  2. John says:

    Nice analysis thank you,

    I think

    This weekend is new moon the period between now and full moon April 16 will be a waterfall decline…

  3. Tom Tom says:

    Hi Joe,

    Yes, the price reversal near the fib level was indeed interesting and did show a bearish engulfing candlestick. Even better it engulfed an indecision doji. Then on Friday there was yet another reversal hammer.

    My one ‘issue’ with the market (djia and sp500) is that they still have not shown enough weakness and downside follow through yet. However that may all change first week of April.

    The reversal hammer on the DIA on Friday occurs after a good amount of sideways cause and seems to point to early weakness first week of April.

    ——————————————————-

    John,

    That makes sense. I am no expert on moon effects or astro, but indications are that market will become highly emotional and volatile next several weeks.

    -Tom

  4. John says:

    Hello Tom,

    Do you still hold on to your prediction that a sell will come in the markets this week.
    My best guess is This Friday will be a market turn lasting till April 25.

  5. John says:

    The astro for the month April is very stressful

    Read this:

    The stock market is vulnerable to a crash starting in the summer of 2013, (Jupiter/Uranus cycle + Jupiter-Pluto). Dates to watch the markets closely start in August 2013, into February and April of 2014. The highest likelihood for the major crash period will be in April 2014 (during the Uranus-Pluto Cycle) sending the Dow to 5,000 by the end of 2014. This same planetary cycle occurred in 1930-31 and again between 1986-87.

  6. Tom says:

    Hi John,

    Thank you for your comments.

    I have to tell you given the strength we have seen over the past few days and earnings season only a few days away, it does not look like a real reversal is going to happen any time soon.

    I am still analyzing the charts and will have a more complete blog posting on my thoughts soon, but for now I would say one has to be very cautious to step in front of this freight train.

    The DIA ETF broke right up and through the potential reversal zone today. In addition to that the Nasdaq composite index is showing a bullish move off of a bullish harmonic pattern that formed near the lows.

    Sometimes a sharp market down turn happens right after a perceived new strength breakout. A similar type market setup occurred in the time frame of July 2011. However at the July 18th 2011 weekly peak, the market was not trading into new highs as we are now in the NYSE. That tells me to be very cautious about any bearish expectations near term.

    It is possible that the market wants to move right up into end of April before the next down turn.

    On a more long term basis the quarterly candlestick chart of the major US indices are showing possible ‘hanging man’ candlesticks, but these are more long term type potential signals and are as of yet not confirmed bearish signals.

  7. John says:

    Hi Tom,

    Thank you very much sharing your view and I m looking forward to your new post.
    I totally agree with your technical analysis.
    But there might be a freight train coming that we can not see yet.

    The astro work is also not 100% reliable but this month happens to be one of the most intense periods regarding bad things can happen.
    Anyway my focus for a turn date is this Friday en next week Monday if things are going down it will be very suddenly and deep.

    Only god knows.

    Best regards

    John.

  8. John says:

    Hi Tom,

    For a longtime I have this vision that the market will tumble down from its record highs with each down day more and more sellers leading up to a climax.
    special days to watch are around April 15 and 23/24
    April 15 is a full moon ( bloodmoon and lunar eclipse).

    April 23/24 is the most intense planet alignment

    Cardinal Grand cross ( In the past this particular alignment gave us war,social unrest,depresions,big financial problems)

    So beware..

    Nice weekend

    John…

  9. Tom Tom says:

    Thanks again for your comments John.

    I think your vision is about to become a reality considering how we finished the trading week today April 4th, 2014. It always amazes me how just one day of market action can change the whole tone of the market on the daily, weekly and monthly time frames. Before today, the bearish picture was fading a little bit, but today’s action seems to be the proverbial nail in the coffin. Amazing.

    Market has been trying to decide which direction to go for over a month now and I think it wants to choose the down direction into the cycle dates you mention.

    Perhaps the speed and depth of the decline will catch most off guard.

    I have to admit that this April 21st date is starting to freak me out a little bit. Not just because it has the Astro significance but also because it falls on the religious Easter holiday and it is also Hitler’s Birthday.

    Perhaps that weekend will be one to just stay in bed and be sure not to fall out of bed.

  10. John. says:

    Hi tom,

    It’s loud and clear what you have posted and some sort of decline like Jan 2008 or Jul /Aug 2011 is still in the picture.
    I m also counting 12-13 ( Tom de Mark) down days.
    So we have Good Friday closed and here in the Netherlands also 2e eastern is closed so I expect the bottom around April 22-23. that is exactly the maximum Grand Cardinal Cross .. after that things will be less stressful but again in the fall this year it will come back again the end of this scary alignment will be summer 2015… after that if history will repeat it self things will change and the sun will shine again…

  11. Tom Tom says:

    There are some bears out there calling for a very severe long term drop in the market maybe similar to the 1929 to 1933 style.

    To predict so far out seems very challenging, but I do think a good 6 to 12 months of price action will be a great ‘tell’ on whether such a dire scenario could evolve.

    There is a great astro piece that claims that the astro setups now are very similar to the 1929 time frame on a longer term basis as compared to the 2013 and next 10 years.

    Read below the title “2013 and Beyond” at this link:

    http://www.sinewaveastrology.com/world.html

  12. John. says:

    Hi Tom,

    I now the astro piece it’s very clear.
    The price action we saw to day good also be a trap just like july 2011.
    The second attempt ( S&P 500 near 1890)
    So maybe Friday will be the turn day for the sell of.

    The trigger maybe a big decline in the dollar index it’s again below 80..

  13. Tom Tom says:

    Day’s like today sure do make one question the bear case. The resilience of the market’s tape is nothing short of amazing.

    I really don’t know if a break down can occur in April now.

    The problem with the dollar index declining is that traditionally it leads to a higher stock market.

    There is also a large bullish butterfly pattern in the Nasdaq which so far it has been reacting off of strongly…

    Maybe these markets cannot resist the temptation to rally up into April 23rd 2014 instead of down into.

  14. John. says:

    Iceberg right ahead.. this market is toast.
    I have a feeling that something simular will happen like Japan 1990..

    The fed will not be able to keep gold down en the dollar up…in my view..

  15. Tom says:

    Your bearishness has been spot on. Nice work.

    I am most curious to see if we will get a very fast move down to the bottom portion of the broadening wedge pattern:

    http://www.bestonlinetrades.com/spy-analysis-for-march-19th-2014/

    Perhaps a swift decline right into this Tuesday April 15th blood moon ?

  16. John. says:

    Thanks for your analysis looks good.

    Two big events on the astrofront the lunar eclipse bloodmoon.. April 15

    And the maximum cardinal climax April 22-23

    This is interesting piece I read..

    The Cardinal Climax has occurred three times in U.S. history, 1761-1770, 1843-1851 and 1927-1934—and now in 2014-15. During these periods, we experienced severe economic downturns, debt crises and huge loss of personal wealth. These were horribly stressful times where economic depression occurred. People were disappointed, filled with anger and mistrust of their leaders. Political gridlock was the order of the day. One can only hope that the re-occurrence of this rare planetary event will not be nearly as disastrous.

    What will determine whether this is a time of great calamity or one of great challenge? The answer is simple. It all depends on whether our leaders and lawmakers work together responsibly to find creative solutions for the many problems that exist; or whether they refuse to compromise, pursuing their own agendas ahead of the interests of the citizens of this country.

    As I review my predictions, please keep in mind that Astrology is not fatalistic. The “stars incline—they do not compel.” Our free will can always take the worst astrological aspects we face and use them for our benefit, growth, learning, and evolution. The choice is ours.

    Each of the planets involved in the Cardinal Climax exert their own influence in the events that will be occurring this year.

  17. John. says:

    Hi tom,

    Have you read this article about Tuesday’s markets.
    Something big is moving this markets that’s why technical analysis and astrology don’t work the way it should?

    http://www.zerohedge.com/news/2014-04-15/your-market-your-market-without-tuesdays-redux

  18. Tom says:

    Interesting statistical fact.

    It will be interesting to see what effect, if any, the much talked about April 21st astro date will have on the markets.

    The last 3 days the market has gone almost straight up like a rocket. Since there is only one more trading day tomorrow before the 3 day weekend, I have to conclude that the market has decided to rally into this astro date as a high. So if the April 21st date has any effect at all, one would think it should reverse the markets to hard down next week.. but we shall see….

    Lets see if there is any meat in that much talked about astro date.

    The markets have been see sawing back and forth like a fish out of water…. BUT have not been able to ‘seal the deal’ so to speak. The sp500 is still barely off of its highs and has not really tested the bulls yet.

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