Stocks: Deconstructing the Geometry and Cycles

The Dow has moved slightly above the 16180 - 16200 range noted in previous post as an expression of the Fibonacci ratio, which would have been a fascinating place for a top. Rightly or wrongly, I'm still looking for an important top in stocks and we should be pretty much there now as shown on the charts below. Based on the analysis on the charts, I think it would take a weekly close over 16,400 to invalidate the current fib expansions/projections. You always have to allow a little slippage on projections, but anything much above 16,400 would be pushing it beyond a "little slippage" I think.

The long and medium term trendlines on DJIA and NQ are still holding, with last week's advance touching them again. Strong weekly closes over the trendlines would become troubling for the argument for a top here.

The cycles I was looking at for a low at the end of the year may be inverting. Guessing polarity in advance is always tricky and, of course, cycles typically will just stop working after a number of iterations. If the market does turn down in the next few days/weeks I have some indications for a CIT/Low around 1/30/14 area. My long-term cycle analysis is still projecting a new high, double-top or lower high in March 2014 (ideally around 3/26 or 3/27), after which pretty much all cycles are pointing down (if cycles work any more in the era of QE).

Of course sentiment remains at extremes, and now there are all sorts of technical divergences cropping up in things like RSIs, breadth and new high indicators, etc.

Kim Rice 12/21/13