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Move over, Santa, the Grinch is coming.
Above is a chart of the Dow Jones Industrials, stripped of all the paraphernalia I use to evaluate the market except one item…a trend line. A powerful message is conveyed here for those who are aware. Support has been broken. Not just one, but two closes were made below support for good measure. This is no accident. Those who follow Elliott Waves will also recognize the five-wave impulse. And those who are aware of Dow Theory also know that a Primary Bear Market has begun. There are many more indicators that will tell you, “Don’t trust the market.” This rally has accomplished the minimum .38 retracement of the initial decline in just two days. Despite the apparent strength of the rally, there is little room left for the bulls. At Pamplona, many runners would try to find refuge in doorways and alcoves from the raging herd. The smartest of them jumped the fence to avoid injury. In my past articles I have attempted to “target” the next move. I have been wrong often enough to adopt plan b. The only thing I will say is, the next decline will probably be much deeper than anyone can anticipate. The last Dow Theory Sell Signal was made in September 1999. That gave participants nearly six months to prepare for what was to come. But it hasn’t always been so. In many cases investors had only days or weeks to prepare for the inevitable decline, so don’t put off what you can do today. “Buy the dip.” Has now become, “Sell the rally!”
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