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I turned CNBC
on one morning this past week just to see what the "squawk on the
street" was. The primary concern as I listened was over the Fed meeting
and whether or not we get a QE 3 in early 2012. A few months ago, as the
August/October lows were being made the worry was all about Europe. Tomorrow
it will be some other worry and next week it will be yet another. In reality,
none of this matters and to sit and listen to the airheads on TV and try to
figure out how this or that will impact the market is a fruitless exercise.
Given that every piece of news known to man is discounted into price, then
from a technical perspective, all we have to be concerned with is the price
action itself. The key, of course, is understanding
what price is telling you.
Dow theory
and the quantitative methods that cycles analysis offers are very good tools
for interpreting price. The most recent example of this occurred at the
August/October bottom. While everyone was worried about Europe and we were
seeing bearish sentiment at levels not seen since 2008, the cycles work told
me that price was making a bottom, which is well documented and which turned
out to be correct. Back in July, the cycles work told me that the May high
would likely not be bettered and that lower prices should come as price moved
down into the expected cyclical lows, which was seen at the August/October
bottom. In June 2010, everyone had misinterpreted the Dow theory and was
saying that we had a "Dow theory sell signal" in place. I don't
recall the fundamental worries that we were seeing on TV back then. However,
it is well documented that my quantitative methods told me that a "Dow
theory sell signal" had not occurred and that in reality price had moved
into a secondary low point in accordance to Dow theory. As is always the
case, the news was the bleakest at these bottoms.
Now, I have
to ask once again, did the news of the time or the commentators on TV tell
you what was about to occur at the 2000 top or the 2007 top? No, they did
not, but my cycles and Dow theory work did. I could go on and on with
examples, which are well documented on my end. But, the real point I'm trying
to make is that what we see and hear on TV does not matter. The worries of
yesterday, today, tomorrow, next month or next year, do not matter. What you
or I may think does not matter. What congress or the President thinks or says
does not matter. All that matters is price as everything is discounted into
price and if we understand what price is telling us, then
all we have to be concerned with is price.
The other
point I want to make here is that no matter how much you may want to believe
it, the commentators on TV are not going to tell you the truth even if they
did know it. As an example, did they tell you about the housing top and what was
about to follow, or of the 2000 top or the 2007 top? Did you hear anything
about the pending credit crisis in 2005, or 2006, prior to things coming
unwound in 2007 and 2008. No! Rest assured, they
don't know what is occurring now, what is setting up to occur, what is about
to unfold, or what 2012 will bring. Have you heard them talking about the
rally out of the 2009 low being a bear market rally? Did you hear them warn
you of the decline into the recent August/October low? Again, the answer is
NO.
The bottom
line is that according to the value and longer-term phasing aspects of Dow
theory, which is based on price, the rally out of the 2009 low is a
counter-trend advance within a much longer-term and ongoing secular bear
market. Once this rally has run its course, the decline into the Phase II low
should begin. But, the key to capping this rally will be the appearance of a
specific cyclical/structural setup that has been seen at every major top
since 1896. Once that setup is in place and complete, the long-term secular
bear market that began at the 2007 top will resume. We are not hearing about
this on the news. Once it begins, they will not understand it, so again, they
will not tell you what is occurring.
 
In the chart
above I have included both the Dow Jones Industrials and the Transports. I
have again received questions as to whether the weakness into November
changed anything from a Dow theory perspective or if the advance that has
followed has. The answer is, "no," in that the Dow theory bearish
trend change from back in August still remains intact. But, as I have also
reported here before, not all Dow theory trend changes are created equally.
The key will be the appearance of the DNA Markers that have been seen at
every major top since 1896. The details of this setup are covered in the
research letters at Cycles News & Views.
Tim Wood
Editor, Cyclesman.com
Copyright © 2004-2008 by Tim W. Wood. All rights reserved.
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