WTF Chart of the Day: Dow Component Change Aftermath

I posted about the expectations of Dow component changes right before it took place last month.

The outcome is almost 1000 points drop starting right on the day of component change, just like what happened before. Stock market indices are funny this way.

What’s next?

1. 3 pushes up pattern in place (highlighted by red lines)

2. The 1000 points selloff confirms the completion of the pattern (the 1st green line)

3. Yellow zone is target area for the 3rd push up

4. Red zone is 50% expansion from 1st quarter of the year (highlight by orange horizontal line at the left side)

5. Should Dow turns lower from here, the pale green zone is the minimal target.

6. Pale green zone is both measured move target based on the 1000 point selloff and also the high of the 1st quarter of this year (highlight by blue horizontal line at the left side).

Notice the duration of each swing has been getting shorter and shorter. The swing that significantly expand in terms of time will mark the direction of the market for many months to come.

Not to be superstitious here, but historically such time compression often coincide with major natural disaster that triggered the past selloffs.

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