Panic – Time To Jump Or The Low?

Our models showed a gap in the Reversals and this is what you look for in a Panic move. We warned ” A closing below 16680 would warn of a drop to the 15500 area.” This was the GAP. So far the Dow fell to 15370.33 on our target for this week as the Panic Cycle. We ran our What-If Model and Asked Socrates what would be the Daily Bullish Reversal from this low assuming it holds. Socrates came back with 17595. Naturally, this is a hypothetical number. The actual number is generated only after the close.

We can see the string of Directional Changes. This is extremely unusual and is warning that this move today has caused systemic damage to confidence which helps the shift into the Flight to Quality, which we required to finish the bubble in government.

Looking at our correlation models, Gold has not run up to the Weekly Bullish at 1187. It has barely moved up today always warning that today is providing a higher probability for a low.

Looking at the Euro, here the Daily Bullish are 11649, 11679, then 11969 and 12353. The intraday high so far has been 11712 currently now trading at 11601. A closing below 11649 today will also suggest that today is the extreme.

Here too today was the target for a turning point with a Directional Change as well. So this type of move today is a good panic that typically eliminates confidence. Market should now be choppy and many will look to take positions on a reaction assuming the trend will continue.

The Monthly Bearish in the Dow lies at 15550. So that is the number that will say this is not a false move but a correction. Then we need to look at October for the next possible low. This is where I would be wrong about a 3 month False Move and we are in a more sharp correction, but that would still not erase a rally to new highs. If we follow the same degree of damage as was the case with the 1987 Crash, we elected the first two Monthly Bearish and held the third. This is the 15550 number currently whereas the first two are 17065 and 16899.

We must always define where an expectation is right and where it is wrong. This is by no means a time for emotional forecasts which will plague the headlines now because that sells.