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DJIA: See Why October 1 Drop Was in the Cards (Plus, What’s Next…)

DJIA: Watch THIS Trendline for the Next Move

by Editorial Staff
Updated: October 02, 2019

You've seen those days -- or even weeks and months -- when an endless stream of "bad news" fails to sour the market's bullish mood.

You've also seen days when even a seemingly minor news report appears to send prices into a big rally or tailspin.

How can the market be so "illogical"?

The reason for this lack of rational behavior is market psychology.

When it's in a bullish mode, it's "primed" to "brush off bad news." When psychology changes to bearish, the market takes "bad news" pretty hard.

We believe that's exactly what happened on October 1.

See for yourself when you examine these two DJIA charts from our U.S. Short Term Update:

On the last day of September, the DJIA jumped to around 27,000 -- and it seemed clear why:

"Dow Surges as Traders Ignore Trump's 'Happy Birthday China' Threat." (CCN, Sept. 30)

When the DJIA fell hard on the morning of October 1, the answer again seemed clear:

"...deepening U.S. manufacturing woes." (MarketWatch, Oct 1)

If you try, you can figure out a reason to justify the moves in both directions.

The real question is: Could you have anticipated the sell-off and the rally beforehand? And did anyone do so?


Last Friday (Sept. 27), using the Elliott Wave Principle and some important indicators, our U.S. Short Term Update alerted subscribers to a short, sharp rally:

191002 Article

The DJIA was the laggard index in today's decline and did not confirm the S&P decline nor the NASDAQ decline. The Dow's intraday low at 26,715.80 was above the intraday low from September 24 at 26,704.90. This non-confirmation may lead to a sharp, but relatively brief snapback rally, but our conclusion is that whether this "snapback" occurs, the index will eventually confirm the other indexes and work toward lower levels. One hint at the burgeoning bearish potential is shown on the chart above.

Stocks rallied Monday, as expected.

Then Monday night, the next Update portended a bearish move:

191002 - Article

Friday's Update cited a potential for a short-term rally, and most stock averages complied, but the rise may already be flagging. According to CQG, just 1.3 NYSE stock rose for each declining share. In the [Dow Jones Industrial Average], the wave                  stands at 27,306.7. The next important move in the Dow Industrials should be a surprising breakdown. There is further           potential as well. A break of the red trendline will be the first sign that the next                is underway.

October is a notoriously volatile month. It's the month when stocks often put in either big tops or major lows.

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