The Distinguished Gentleman of US Indexes

I have an ongoing gag (to keep myself, if no one else, entertained) where the distinguished Clark Gable is inserted into commentary about the old fashioned indexes known as the Dow Jones Industrial Average and the Dow Jones Transportation Average. He celebrates good weeks at Happy Hour and drowns his sorrows at bad weeks just the same.

The joke started when I just could not get the image out of my head of the typical Dow Theorist as being a mature smoking jacket and ascot clad gentleman doing very high minded stock market analysis in a well appointed office with dark cherry woods and doilies on the side tables. Oh, and let’s not forget trusty wife Mable, dutifully preparing the Beef Wellington in the kitchen while her Dow theorizing husband theorizes deep market thoughts. Something like that.

So anyway, back here on planet earth the Dow is making a hard crack down to support that it really needs to hold in order not to break down. That means it has to hold the September low. Unfortunately, as noted in NFTRH 626 the Dow and other US indexes (aside from the SOX) did not make higher highs to the October 12 highs and that was noted to be a vulnerability (along with the deplorably over-bullish sentiment backdrop). It represented a short-term double top (red dashed line).

But it also represents a larger double top. For months after the March crash we watched the upside ‘crash gaps’ as an extreme upside potential. SOX and NDX simply obliterated those gaps and SPX climbed through its gap. That left the venerable one here as the last man standing in the way of the relief rally’s objective. The Dow finally accomplished that task on September 2nd with a gap up, bull trap and immediate reversal. And now it has been the better part of 2 months before this downside reaction, which is actually the second reaction to the one in September.

Weekly charts don’t show them, but there are a ton of downside gaps on the daily charts of all the major indexes and they are way down there, with some near the crash lows. Meanwhile these political dorks on both sides fiddle. It’s going to be interesting.

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