DOW THEORY ANALYSIS

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7/10/06 UPDATE:           Below is a recent CBS News headline on top, my comments below it, and then a new DOW chart at the bottom.     "Meanwhile, the short sales ratio of the public (the so called "crowd") and NYSE members (all the well known Wall Street broker firms) has hit again a new all-time historical high according to the latest NYSE Members Report." "The notorious bear Richard Russell of Dow Theory Letters told his subscribers Wednesday night [sic, 7/5/06,] that, despite 'bobbing and weaving ... the big picture is that it's a bear market.'" "But contrariness might be interested that the spread between AAII's bulls and bears has nearly reached the level of the March 2003 bottom." WOE is me, what shall I do?  Oh, what shall I do?   Needless to say, for those lost souls without a "few" good forecasters to "compare notes with," these kinds of panic thoughts are probably very common this summer.    As my subscribers "should know," if they have been reading most of my material for the last few months and weeks, this 2006 top was either: 1) The top of a major bear market rally up, or the final bull top up, and the markets are now headed down for as far as the eye can see...both of which are "very unlikley," or... 2) Its' the top of "the most bullish" part of a final bull market leg up (Elliott Wave 3 or i of 5), and will "weakly" continue on up into 2008 AFTER a "serious" intermediate term low is made sometime between 9/21 and 10/21, of 2006, when the "fully expected" 4-Year Cycle low is "due" to make a trough (low), OR... 3) IT's a brand new BEAR MARKET down from 2006...which is also "unlikely" to "very unlikley."    While Russel is still a "force" in the market, he is also a Perma-Bear, sorry about that Bill, and that "impression" is expressed in that news clip by the "very kind" use of the adjective "notorious."   In my opinion, since DJIA has not even made one new "swing low," a lower low below the last secondary pivot up, which would require a drop below 10,200 minimum, then it's "very premature" to be calling this a "bear market."   Furthermore, it's my opinion that Mr. Russel will be eating major crow by the spring of 2007...not that he will be alone this time around and not to imply that he hasn't seen many others eat theie share over the years...your's truly included on one rare occasion.   However, even assuming that we are correct, we still do not see how "deep" this current "correction" will take the indexes, eventhough, "I believe" that most of the "serious damage" will be limited to the technology based indexes.      The reason I "expect" that is because the new technology indexes are "clearly" still inside a Bear Market coming from the 2000 all time highs, eventhough, the lesser trend is actually still up into 2008...we think, while the "old dogs" indexes, like TRANS, UTIL, DOW, and SPX, are fighting for a final leg up and top to a long and tired Bull Market that started at the 1974 and 1932-42 lows.      By the same measure, I expect the drop in the DOW will see the least amount of damage, and hold somewhere between that 10,000-10,200 pivot and 10,655...which would only be a "retest" of the recent, June, 06', low. FOR NOW, 7/9/06:    DOW closed on 7/7/06 @ 11,090 THE PRIMARY TREND is STILL DOWN, since the DOW did not make a new closing high above the 1/14/2000 high, AND the 10/2002 low DID make a lower-low below the 10/1998 low. THE SECONDARY TREND is still UP from a series of higher-highs and higher-lows that HAVE NOT been broken since 2003.  The DOW (INDU) would have to drop below 10,000 on a daily closing basis to CLEARLY reverse the secondary trend. THERE IS A "possible " confirmation failure , or divergence, "in progress," since both the DOW Transportation Index (TRAN) and the DOW Utility Index (UTIL) have already made new higher-highs, above their year 2000 all time highs, BUT the DOW Industrials Average (INDU) has failed to make a new daily closing high here in the spring of 2006.   By this measure, IF DOW fails to make that new higher-high before "too long," say a few months, then a continuation of the OLD BEAR MARKET, from 2000, will be "signaled," eventhough, it has not been confirmed as yet.   ALSO take note that while the actual DOW index (INDU) did fall a little short of making a new daily closing high over it's 2000 ATH, at 11,642 Vs. 11,751 in 2000, and also failed to make a higher "spike" high (intra-day extreme), it's proxy (DIA) did make a new all time at 115 vs. 111, which was a big time high by > +5%...for whatever that's worth at this point? B.B.

ALSO note that while not based on DOW THEORY, the DIA proxy also made a CIT down at the exact Gann target where "price squared time," eventhough, the DOW index did not, AND both the proxy and index are now being faded, shorted or sold, as they "retest" Mr. Gann's key 1:1 angle "from below." For the time being, these are all nasty "bear signs," but I will hold with my current LongView "expectations" unless DOW <10,000 before 11/2006. BY the way, IF this turns up at a 10/2006 low, "as expected," then we will have all the data needed to project the "most probable" (3) of ((5) top in 2007 AND the "most probable" final Bull Market top, (5) of ((5)) of V of ((III)), in 2008.   For The Price-Time Review Andrew Quiggly Editor    All content is copyright(2003-2006) PriceTime LLC

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