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Long Term Chart Patterns Suggest Negative March

March 9, 2008 2:51 PM

I was studying the long term chart patterns this morning (yes, I know, I have no life)…and it does not appear favorable from a risk/reward standpoint. The charts suggest that we may have already seen the highs for this month. In fact, I would say it is highly likely. The SP long term charts suggest that the max high for this month should be one of the following areas….1360,1380 or a max top of about 1440. The odds of 1440 appears exceedingly small, and the most likely outcome appears to be a max high of either the 1360 or 1380 range with 1360 range being far more likely. The charts also suggest where a bottom would be for the month. This will be a …gasp…for the longs…..the bottom should be no lower than 1140 range. I am not saying we WILL go there…but if we do get there…bet the house on long. We will not go lower than that area in March on any panic selling. I am almost certain of it. I coined a name about a year ago looking at chart patters…. V and Reverse V…and March is in what I call a Reverse V. This is the worst possible formation to be long in and it suggests March should finish negative and possibly heading lower, maybe far lower. Keep in mind, the chart pattern does not say this is where we WILL go or will finish the month. It is just suggesting that we should finish the month between a high of 1360 or a low of about 1140. The long term chart pattern did predict the Jan low as it predicted we should not exceed 1260 - 1270 range in January. The only reason I say “range” is that charts suggest resistance and support “areas”. They provide insight as to what people are most likely to do in that range - until proven otherwise.

Looking at the Dow charts, it is a very similar pattern, which is not surpising. The Dow was in a Reverse V in January, and the chart predicted a likely high in the 13400 range for January…which was the high….and a max low of 11,500…which also was the low. The Dow is also in a Reverse V in March. The march chart predicts a max high in the Dow of either 12400, barely over 12500 or all the way to 14000 and a max low of…again…far lower…of about 10,400. It also appears very likely that we have already seen the highs for March for the Dow. It is always possible that we could break out of the Reverse V pattern. If we did, we would likely spike to the upside in huge fashion….but it is always very unlikely and would take dramatic news to do so I believe.To go up in April, the Dow would need to close above 12000, ideally a couple of hundred points above it, then the April high could be as high as just over 13000 and the likely low would be 12000. That appears to be a big “if” at this point….

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