This Chart Says It All

Here is a chart of the rally in the Dow from August 1982 – October 2007
The rally took 25 years. The Dow gave back more than half of those gains in 17 months. 17 MONTHS!!

The Dow has now taken out the key 50% retracement level at 7504. I think the most likely scenario is at least a test of the 62% retracement line, at 5,919. If it occurs, I would expect to see price overshoot 5,900 and test the 5,200 - 5,500 range. But I would then expect to see The Dow close the month above 5,900. We’ll see how it plays itself out.

Bottoms occur in emotional panics. The last few days should be sharp, violent plunges. You do not want to be guessing on the bottom during these days, because you can be a day away from price in time and still be 10-15% away from the bottom in price.

Here is a chart of the Dow from 1996 – Present. You can see how many times the 50% retracement line (Black Solid Line) was tested (Black Arrows).

The last test led to a quick rally (Green Arrow) up into the 38.2% retracement line (Dashed Black Line). This rally failed quickly and the Dow has now taken out the 50% line (Blue Arrow).

Next stop sure looks like the Orange Box.

Weekly Bands
The first big drives down stopped at the -35% Band (Orange Line). That line is currently at 625.7 on the S&P 500. That is a long way below here.