Monday, December 21, 2015

TRAN Warns of Potential 4000-Point Decline in the Dow Jones Industrials

Things just got interesting again.  Last week, TRAN broke its flash crash low, and that's important, because it gives TRAN's year-long decline an impulsive appearance.  This is problematic for long-term bulls, because a decline that takes a year is obviously not "short-term," and only occurs at significant wave degrees.

Let's start off with TRAN's chart, and then look at the implications for INDU and SPX:

Interestingly, the large complex flat I theorized back in October for INDU is starting to look more and more reasonable.  If this count is correct, it implies a downside target of 13,154:

INDU may be forming a complex flat at lower wave degree (short-term) or could be forming a very-bearish nested 1-2 count -- we don't know just yet.  But both options are ultimately bearish.

The same possibilities exist in SPX, but again, both are intermediate bearish:

In conclusion, TRAN's break of the flash crash low has far-reaching implications for the overall pattern, and suggests that another leg down is pending for the broad market.  It will take a sustained breakout over the all-time-high in SPX to call that into question, so unless and until that happens, we're going to operate under the assumption that the intermediate edge has to be given to bears.  Trade safe.

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