Without going into all the details, it kind of works like this:
The bottom in 2002 was a head and shoulders bottom with 3 distinct dips in it. What these 3 dips show is 3 cycles.
The cycles are not equal length to each other and thus as the market rallied and moved into and away from the markets perspective the cycles have expanded, the first hit in Jan 2004, second in March 2005 and the third is due to hit now. This is the reason why this top has taken so long.
Also the decline from March to April last year was down the diagonal of a rather flat time consuming ellipse. It is for this reason that the markets did not get nailed hard last year as this ellipse had not expired. Price and Time did not warrant a decline.
This ellipse is expiring now, because the current ellipse has burnt its energy in time rather then price its natural to assume that the next ellipse will consumer price rather then time and thus be vertically positions, assumptions are downwards.
The current 45 degree angle in the market is 6.5 points per a day. The market bottomed in 2002 at 7197, this is 44 degrees down from the peak in 2000.
As it stands first support should be seen around 9800, once this is cracked there is nothing to 8800 in September.
DOW Price at posting:
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