Dow Heads To The Downside: It's Not Syria

Includes: DIA
by: Kevin Wilbur

The last several days have been full of the news of general stock market price woes and tensions with Syria seem to be high on the headline blame list. On Monday the Dow 30 Industrial Composite Index dropped about 150 points the last hour of trading. Tuesday we saw the Dow shed another 170 points. We find headlines like "Syria concerns weigh on markets" and "Asia joins global equity rout on Syria fears; Nikkei leads losses" leading the financial news. However, the premise that Syrian tensions may be the primary cause of the Dow's woes and the sell -off early this week may be seriously misplaced. Investors and traders may want to look a little deeper before trading on such a premise.

Many analysts have been calling for the possibility of a general stock market correction to start this month. I'm one of them. Last month's earnings announcements were on balance not particularly strong, neither were many forward outlooks. Unemployment in the U.S. also remains a chronic and unresolved problem throughout the economy. In early August Fed tapering concerns mounted again. In response, bonds resumed a trek towards yet another poor monthly performance, their fourth such month in a row, and this time stocks followed. The short-lived aftermath on Thursday and Friday last week following Wednesday's Fed Minutes Release simply paused the Dow's downward trajectory for a couple of days, which isn't an unusual occurrence. Historical seasonal volatility associated within September in the stock market looms right around the corner. Technicals are also breaking down.

In light of these fundamentals, a reference to Syrian tensions is unneeded to account for the market's present weakness and current trading price levels. In fact, it's my observation that the market is performing in a manner and toward price levels consistent with my forecast at the beginning of this month. This week's prices are running right along key quarterly echovector slopes established at key time-points during last week's important Fed Minutes week. This can be seen in the following chart of the DIA ETF, which I will use as a proxy for the large cap stock market composites in my analysis.

(Right click on image of chart to open image in new tab. Left click on the image opened in the new tab to further zoom EchoVector Analysis chart image illustrations and highlights.)


(Click to enlarge)

The chart above highlights key quarterly echovectors at key time-points during last week's important Fed Minutes week. We can see the coordination of last Monday's weekly beginning (as the market set up in anticipation for last Wednesday's Fed Minutes Release) with its echo-back-date Monday one quarter ago. This echovector is highlighted in solid white.

We can also see last Wednesday's extended hour's price low that followed the Fed Minutes Release and its coordination with the extended hours price low with the corresponding Wednesday one quarter ago. This echovector is highlighted in solid grey. Its slope is key here and this echovector was established last week before all the Syrian tension concern hit. Note that the quarterly echovector pivoted downwards also last week (from the white quarterly echovector's slope at the beginning of the week to the grey quarterly echovector's slope on Wednesday after regular hours close).

Looking at the grey-spaced quarterly coordinate forecast echovector that runs from the weekly low of the week that followed the Fed Minutes Release week last quarter, we can now also see that the DIA simply closed right on that coordinate forecast echovector Tuesday this week. This indicates that, at most, Syrian tensions may have just gotten us to the coordinate forecast echovector's price level just a few days earlier than in the corresponding week last quarter.

And when you factor in last quarter's further lows as prices moved into June's primary options expiration day (vertical red-spaced line at 6/21) following the Fed Minutes Release in May, and slope momentums to last week's Fed Minutes Release, and include the weight of similar subsequent quarterly echovector momentum at work forward into the beginning of next month, and also add the effect of potentially coming historical seasonal weakness -- on an annual basis -- for September, then the relative weight of Syrian Tensions and its actual effect on the Dow's current price level becomes spurious. The coordinate blue purple price extension vectors also highlight this as well.

Actual economic fundamentals, and the above technical factors and coordinate echovector flows, and their coordinate forecast echovectors and corresponding pivot point projection levels, and perhaps the long Labor Day Weekend coming up, may account more for current price levels than international headlines may misleadingly indicate.

And on August 7TH I put out an alert in an article titled "Could This Be A Correction That's Coming? An EchoVector Pivot Point Perspective" regarding coming weakness in the stock market. Since then the Dow is down about 700 points or almost 5% -- and the correction may not be over yet.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.