Partial Credit

By: Ed Carlson | Tue, May 6, 2014
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Last week's Hybrid Lindsay forecast didn't work near as well as the previous week's forecast which called for a high on 4/21/14 (the high of the first rally from 4/11/14 occurred on 4/22/14). Last week I was expecting a low near Thursday or Friday and that clearly didn't happen. I'm still going to claim "partial credit" however as I remain convinced of the existence of an inflection point in the Dow late last week (or possibly as late as Monday).

In hindsight, the key should have been a small (but perfect) ascending Middle Section which forecast a high last Friday (Figure 1). While I did see it, I mistakenly ignored it due to the fact that it was not centered on the low of either a basic cycle or multiple cycle (for more on Lindsay cycles, download a free copy of An Introduction to Lindsay at Seattle Technical Advisors).

In Figure 1, point E (the default measuring point) counts 88 days to the turning point, the closing low on 2/3/14. Counting forward 88 days from the turning point generates a forecast for a top last Friday. At this point, Friday is the intra-day high of the April rally. I believe we have seen the end of the rally from 4/11/14.

Figure 1

Another reason to believe the April rally ended last Friday is the 28-day forecast in Figure 1 above. In this case, we are counting from the high of a flattened top on 3/7/14 to the high of what I believe was the end of the bull market on 4/4/14. That interval is 28 days. 28 days beyond 4/4/14 was last Friday. This is an approach which works well (but is not a stand-alone method) when forecasting reaction highs during the first basic decline in a terminal decline. A terminal decline comes after the top of a bull market. Figure 2 below shows how it worked forecasting those reaction highs after the bull market top in October 2007.

Figure 2



Ed Carlson

Author: Ed Carlson

Ed Carlson
Seattle Technical

Ed Carlson

Ed Carlson, author of George Lindsay and the Art of Technical Analysis, and his new book, George Lindsay's An Aid to Timing is an independent trader, consultant, and Chartered Market Technician (CMT) based in Seattle. Carlson manages the website Seattle Technical, where he publishes daily and weekly commentary. He spent twenty years as a stockbroker and holds an M.B.A. from Wichita State University.

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