Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Tuesday, July 14, 2020

Taking Stock

I post an update of the Dow Jones Industrials every business day on my Face Book page. Yesterday's was long and, I think, meaningful, so I'm reposting it here.

Monday, July 13, 2020 Yellow Arrow Sideways
DJI30 Index at the close —- 26,085.80 +10.50 (+0.04%)

The index opened at 26226, up 150 points. It spent the next half hour between 26240 and 26330, then started rising, hitting a hi of 26525 at 11:30 on the way the daily hi of 26639 at 1:45.

Except for a brief bounce of about 100 points between 2:30 and 3:00, the rest of the day was down. The image of an avalanche springs to mind. The lo - a mere 42 points below the close - occurred only 4 minutes before the end of trading. The day’s total span was 595 points, and it all occurred after 1:45.

This was a dramatic reversal in the last 2 hours. I actually felt hopeful around lunch time Today’s hi was the highest since the pop above 27000 from 6/05 to 6/10. A glance at Graph 1 shows that recent action is now the second sideways move of more than a month’s duration since the 3/23 lo. This does not look like any kind of impulsive upward move.

The red and orange horizontal lines represent the Fibonacci .681 and .786 retracements of the drop from the Feb 12 hi to the March 23 lo.

Graph1 - two sideways moves

The only practical alternative view is that this is an unusually long and extraordinarily complex counter current move - the the main thrust being down, shown in Graph 2. The Index is moving into a trend line wedge where something will have to give pretty soon.

Graph 2 - Into the Wedge

In Graph 2, the peak on June 8 defines the top border of a potential down-sloping channel from the 2/12 hi that is a stunning 10684 points wide. If this concept has any validity, it could lead to an ultimate lo far below the 18214 reached on 3/23. 

In 1929, the Index lost something like 89% of its value. Can you imagine the DJI30 Index bottoming at about 3000? It needn’t be that extreme to be devastating.

The 3/23 local bottom represented a loss from the 2/12 top that was within 50 points of a Fibonacci 38.2%. A 50% loss would put the Index at 14784. A 61.8% loss would bottom at 11295. Other potential support levels are in the regions of 1600, 1500 [support/resistance levels from 2014 -16] 14165 [the 2007 all time hi] and around 13000, 11000 and 10000 - support/resistance levels from 2010 to 2013. These things are shown in the third Graph, labeled Trend From the 2009 Bottom.

The Fibonacci 61.8% loss at 11293 is in the broad range of round number support from the last few of those mentioned. So the range from 10000 to 13000 is a reasonable target for the ultimate low, which could happen this year or off a few years into the foggy and unpromising future.

 Graph 3 - several possible support levels

The effects of the corona virus on the population and the economy of this country are going to be far worse than what we have seen so far, due to the abysmal denial and mismanagement of donald j trump and his corrupt minion governors in republican controlled states. Some are starting to realize it now, but what they are doing is far too little and far too late. Tragically, this devastation was largely preventable, as a few nations like New Zealand have shown. Even here in Michigan, where Gov. Whitmer has tried to do things right in the face of organized and intimidating armed opposition, we have been trending the wrong way for almost a month. Can you guess why?

Stocks are at an epic level of disconnect from the underlying economy - which is weakening as you read this. When this situation rights itself, the spring-back will overshoot, and probably by a large margin. That will be the time to buy. 

Stay tuned. Pictures at 11000.

Closings -
7/13/18 - 25019
1/02/20 - 28869
6/12/20 - 25605
7/13/20 - 26086

NYSE Internals -
A/D = 1093/1899 = 0.58
A/D Vol = 0.54
New Hi/Lo = 119/6 =19.83