Here are the present considerations in analyzing the Dow:  The Dow is supported by two trendlines, both of which are penetrated, but not decisively.  Momentum is decisively down, but as we know momentum can be reversed at any time (see March 6, 2009).

At this point in human (and animal) evolution everyone knows about the dead cat bounce.  (We were on KQED’s Forum program with Michael Krassny after the 9/11 crash and referred jokingly to the “dead cat bounce” and the program was flooded with calls from animal rights activists.)  The saying is, “Even a dead cat bounces”.  Meaning that after a panic there is an automatic bounce in prices.  The cat has not bounced much here.

And in fact what is occurring here may be a flag.  Flags are described at length in the 9th Edition.  A flag is a resting pattern which occurs after dramatic up or down moves.  If it is a flag it means that we have as much more down to go as we have already  experienced since “The flag flies at half mast”.

As our readers know we took a fair amount of risk off the table as this downwave was starting and hedged (partially) our remaining positions.