trader717

Dow's Next Move: A Technical and Fundamental Look

I know of the 5-wave cycles, but I have also never heard of the 7-wave cycles. If you do notice, the 5th wave up marked about the top, and then the Dow proceeded to trade in a range with a subsequent break below to form the first multi-month down leg A which bottomed in March. It was a good article to read. Although, you didn't provide too much into the fundamental aspect going on in the markets. You mentioned earnings, so a forward P/E of the Dow companies compared with historical forward P/E's can be important. Fundamentally, it is also not just our economy that is in a recession, but now European economies. Therefore, even companies with high international sales that have been holding the markets up as much as they could are going to see earnings deterioration.

In the end, yes a rally is highly probable and would be healthy, but the trend remains down and both technically and fundamentally, the markets are bearish. (by the way for all those technical analysis haters out there, I believe technicals have been more accurate recently as we had many analysts from top banks like Morgan Stanley and UBS predicting S&P over 1,700, when the technicals were showing a possible double top and a subsequent breakdown, I strongly believe in both technicals and fundamentals, but just wanted to remind the haters that both can work)