Seattle Technical Advisors provides technical analysis of the equity, fixed-income, commodity, and currency The forecast for the high of the right shoulder has not changed since the October Lindsay report although there is an additional forecast detailed in this report for an earlier, albeit lower probability, high. Stock Traders’ Almanac reports that the day before and after the US Thanksgiving holiday (11/27/14) combined, there have been only 13 losses in 61 years. Given the strong seasonal strength during that week, it seems very possible the expected high of the right shoulder may occur a few days later than our single-date point forecast of 11/21/14.
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Lindsay Report Who was George Lindsay and why should we care? http://tinyurl.com/m87d9oh
Seattle Technical Advisors The leading authority in Lindsay Market Analysis
Special Report November 11, 2014
Ed Carlson
[email protected]
Lindsay Report
November 2014
Long Term Intervals Originally published in the 11/3/14 Market Update. Friday’s new high in the Dow tells us that the right shoulder following the 20112014 basic advance has not finished yet forcing a reassessment of the current situation. A 15 year interval forecasts a high from 15 years to 15 years and 11 months in the future. The current 15 year interval is counted from 10/8/98. This date is the low of the separating decline of the 1998-2000 three peaks /domed house pattern. Separating declines are a common origin for 15 year intervals. It counts to a high in the period from October 2013 (15 years) until September 2014 (15 years, 11 months). At 15 years, 11months the September high was a good fit for the long term interval. Since 1921 the longest 15 year interval was the high in 1960 which stretched the interval to 16 years, 1 month. November 2014 makes the interval 16 years, 1 month.
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Lindsay Report
November 2014
Middle Sections Originally published in the 11/3/14 Market Update. The difficulty in determining the correct origin of the basic advance following the sideways movement of 2011 has been well-documented in past reports. With Friday’s new high in the bull market it is clear that regardless of which origin would have been chosen for the basic advance from 2011, the only high that fits Lindsay’s standard time spans was the high on 7/17/14. The basic advance is definitely over and the Dow is into the right shoulder which we expected due to the advance having lasted 941 days – an extended basic advance. Lindsay wrote that a right shoulder always appears after a long (or extended) basic advance. A high is still expected in the immediate future due to Hybrid forecasts as well as short-term cycles which point to a high today and late last week. Lindsay wrote that the high of the second multiple cycle (the high we are currently searching for) is forecast with an ascending middle section centered on the low of the current multiple cycle (point E on 3/6/09). None of the forecasts for a high now meets that criterion. Hybrid forecasts point to a high during the final week of November as does an ascending middle section from 2003. Point C on 6/23/03 counts 2,083 days to the low on 3/6/09. 2,086 days later is Friday 11/21/14 – a date which is confirmed by a middle section centered on the low of the long cycle (10/10/02).
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Lindsay Report
November 2014
Lindsay Originally published in the 11/7/14 Daily Commentary. The forecast for a high to the right shoulder in the Dow remains during the period Nov 19-28, however the market seems to want to get this bull market finished. It probably doesn’t feel that way to most people but with the Oct low coming 12 days earlier than the Lindsay forecast and the Dow blowing past the forecast for a top earlier this week my conclusion is that the right shoulder may show up earlier than Nov 19 rather than later. The forecast high for the Dow is 17,600-17,650 (SPX 2,057) so we’re pretty much already there. A pullback into a low later next week (forecast by middle sections, et al.) would allow the Dow to kill time without exceeding the price target. Elliott Wave: A follower of Elliott wave could easily conclude that the rally from the low in 2011 has already seen its “theoretical” high and that the recent new high is wave B of an expanded flat formation. If that were the case then EW theory says the highest level that the current wave B rally could reach is 2,090 (161.8% retracement of the wave A decline in October). The high in May 1965 was the end of a basic advance and the higher high in Feb 1966 was its right shoulder. The June'65 to Feb'66 rally was almost exactly 161.8% of the May-June'65 decline. If the Dow is in an expanded flat then a final wave C down into the Lindsay point I would not be the killer bear market I’ve been expecting (but would not rule out a typical cyclical bear) and we could expect Lindsay point J to be much higher than the Lindsay point H (expected near the end of November). Of course, whether the market is, or is not, forming an “expanded flat” remains to be seen.
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Lindsay Report
November 2014
Middle Sections November 10, 2014 There is one other, earlier possibility for the top of the right shoulder; 11/10/14. August 2008 can be interpreted as either a descending middle section or a flattened top. The “best” peak (and not previously mentioned) on 8/15/2008 would be point E of a descending middle section. It counts 1,145 days to the low of the basic cycle on 10/4/11. 1,144 days later is Friday 11/21/14 and adds confidence to the forecast on page two. Alternatively, counting from the last peak of a flattened top on 8/28/08 to the low of the basic cycle on 10/4/11 is 1,132 days. 1,133 days later is Monday, 11/10/14. History has shown that sometimes counting from point G of a descending middle section is more successful than point E. Point G on 9/10/14 counts 4,413 days to the low of the long cycle on 10/10/02. 4,414 days later is Monday, 11/10/14. Point E of the same middle section counts 4,425 days and is part of the forecast for a high on 11/21/14. All the above are simply “confirming” forecasts as Lindsay’s requirement for forecasting the high of the second multiple cycle is for an ascending middle section forecast centered on the low of the multiple cycle. Unfortunately, both of the dates in question have such forecasts. Point E on 7/7/03 of an ascending middle section counts 2,069 to the low on 3/6/09. A high on 11/10/14, at 2,075 days, would be late but within the margin of error for a forecast covering over eleven years. Whether or not 11/10/14 is the final high it is very likely to see the market pullback during the time period following it.
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Lindsay Report
November 2014
Hybrid Lindsay Intervening Low If the Dow is to see highs near both dates previously mentioned, Nov 10th and 21st, there must be an intervening low. My own Hybrid Lindsay method has a good track record at finding these lows that Lindsay never bothered with. These forecasts are made finding confirming middle section forecasts centered on the multiple and basic cycles. Most of the year 2000 and into early 2001 can be interpreted as a large flattened top. The center peak on 9/6/00 counts 2,591 days to the high of the multiple cycle on 10/11/07. 2,591 days later targets a low on 11/14/14. There are two possibilities for point C of a descending middle section in Oct 2007. 10/19/07 counts 1,291 days to the high of the basic cycle on 5/2/11. 10/16/07 counts 1,294 days. They confirm the forecast from the multiple cycle with targets of Thursday, 11/13/14 and Monday, 11/17/14, respectively.
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Lindsay Report
November 2014
Cycles & Intervals A short-term trading cycle averaging 24 tradingdays points to a low near 11/14/14. The Dow made a perfect cycle low of 24 days at the low on 10/16/14. A low on Friday, 11/14/14 would make the cycle 21 days – a bit early – making me think that the low may be seen the following Monday. A 45 trading-day cycle has been occurring between highs for the last three years. The next cycle high is due on 11/21/14.
Lindsay wrote that a short-term interval of 222 days has occurred throughout the entire history of the Dow Jones Industrials index. A low on 11/14/14 would make an interval from the high on 4/4/14 to be 224 days. The following interval points to a turn on 11/19/14 and, if correct, will be 222 days. There is no 222 day interval pointing to a change in trend on 11/10/14.
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Lindsay Report
November 2014
Right Shoulders Lindsay warned of a right shoulder developing anytime the preceding basic advance was long or extended. As the basic advance which ended at the July high fit the standard time span of “extended” we knew to expect a right shoulder. What we didn’t know was that it would end at a high which was higher than the high of the basic advance. Lindsay specifically left open the possibility for a higher right shoulder but past examples are few making it a low probability bet. The preserved written work of George Lindsay does not reveal a method for forecasting the high of a right shoulder but my own study of past right shoulders reveals that they can usually be forecast by centering a middle section forecast on either the high of the previous basic cycle or the low of the current cycle… and sometimes both work. Centering a forecast on the low of the current basic cycle on 10/11/11 finds point E of a descending middle section 1,145 days prior. 1,145 day beyond 10/11/11 is an expected high on 11/22/14. Centering a forecast on the high of the previous basic cycle, 5/2/11, takes us to the high-high-high forecast on page eight.
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Lindsay Report
November 2014
Conclusion The forecast high on 11/21/14 still looks better than 11/10/14 but the earlier date does have the most important element (as does the later date) – an ascending middle section forecast centered on the low of the multiple cycle (3/6/09). Nov 21st has an additional attribute not found on Nov 10th; the presence of a potential high-high-high interval. The high of the first multiple cycle, 10/11/07, counts 1,299 days to the high of the next basic cycle on 5/2/11. Counting forward an equidistance targets an important high on 11/21/14.
If the expected low near 11/14/14 is broken before the high on 11/10/14 is exceeded it should be a good sign that the early forecast was the correct one. Otherwise, the evidence seems tilted toward the high of the right shoulder, and the 2009 bull market, falling on or near 11/21/14. Given the following week’s bullish seasonality (US Thanksgiving holiday), the high may get dragged into that week.
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Lindsay Report
November 2014
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