Fun With Fractions and Coincidences

Here's a different look at the chart presented yesterday: 

This time, we copied the entire section in box 1 (outlined in red) and shrunk it by 2/3 (shown in the black box). 

Why 2/3?  Why not?  It seemed to fit well, is close to the "Golden Ratio", it's a common ratio in technical analysis, and as can be seen at bottom of the chart the volume for the year-and-a-half from late 2011 until now (2nd section of rally from the 2009 lows) has been roughly 2/3 of the volume for the year-and-a-half period from early 2009 until late 2011 (first section of the rally from the 2009 lows).

Given this is all pure conjecture and that this type of analysis is not our usual beat, we won't try to rationalize this, however we'll present one more compelling reason for the 2/3 ratio tomorrow.


Interestingly, if the contents of the black rectangle were overlaid on the actual market chart, the highs would be at the exact same level which the market currently trades. In other words, our arbitrary 2/3 ratio results in not just the exact length but also the exact height of what we're calling the 2nd half of the rally from the 2009 lows.  Of course this is only true, and extremely impressive, if there's a top occurring in the market currently.  Admittedly, that's a very big "if". 

And if that is the case, this chart suggests that the coming drop will end near the 13100 level circa mid-June (as per box 2 in the chart, which is copied & pasted directly from black rectangle below).  That happens to represent a 2/3 correction of the rally from the lows of mid-November 2012.  Keep this 13100 level and mid-June time frame in mind as you read the next two paragraphs.

In 2012 the DJIA started with a 9.3% virtually uninterrupted rally that essentially topped-out in mid-March.  By mid-June it hit the year's lows, almost exactly 9.3% down from the March highs, ending just below the level at which the market began the year.

In 2013 the DJIA has started with a 10.2% virtually uninterrupted rally to mid-March.  A drop to the 13100 level in mid-June would be 9.3% - basically the exact same percentage as the rally and the subsequent drop during the first six months of 2012, in the exact same time frame, and also similar to 2012 it'd end just below where the DJIA started the calendar year.   

Another coincidence, that'd be exactly where the uptrend from the 2009 lows will be in mid-June.  See the red line:

That seems like a large and quick plunge for a market that hasn't even had a 3-day drop this year, but if anything a 9.3% slide would arguably be a minor and common correction given the stats presented here.

Our own belief, for a great many reasons including those detailed herein the past few weeks, is that the DJIA is more likely to drop to between 13500 and 13800.  That's if 1/2 to 2/3 of the spike from January 1st is corrected, and that range just happens to be where the uptrend from the 2009 lows will be mid-June on a logarithmic scale. That'll also be where the 200-day moving average for the market should be by then.







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