Dow sees 265-point weekly decline

Price at time of writing – 15,755.

The Dow Jones’s decline has further vindicated the potency of my long-term resistance band defined as 16,203-16,186.

Short positions opened recently at my target level of 16,175 are now nicely in the money, and should be held for further gains. Stay short on the Dow Jones, S&P 500 and US 10-Year Treasury bonds.

Today I return to my long-term chart of the Dow, highlighting only the big percentages that derive from lows of major importance. Significantly, it highlights a near-perfect alignment of four major percentages. This alignment encapsulates the reasons behind my long-term target at 16,175, and why the index touched and immediately retreated from this highly significant level. It is sometimes said that the most important percentage within the Gann theory is that of 900%, and it can be seen in the extended chart that by hitting this target, a rise of 900% from the low that followed the 1987 crash has now been fulfilled.

Coupled with the completion of a rise of 150% from the major low in March 2009, we have witnessed a very rare, near-perfect opportunity to sell a financial product. This same potency will also apply if and when the Dow eventually breaks above 16,175.

My minimum expectation for this pull-back will be to complete a decline of 8.33%, taking the index back to 14,827. An intraday extension of the fall to an area of support defined as 14,394-14,557 is highly likely however, whereupon profits on short positions may be booked.

Recommendation:  Stay short. Target 14827. Stop-losses can be activated on strength above 16250.

Dow Jones chart

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