Let’s examine the last three corrections of 2018 and 2020.
The DJI signals danger when the prices are near/over 3x trade ranges away from the short term trend MA. The further it climbs away from the MA the higher the chance of the correction coming.
From June 2017 – Jan 2018, the DJI continued to turtle into higher values while being greater than 3x the trade range away from the MA. January 2018 it reached an unsustainable level.
January 2018, DJI was 5549.5 pts from MA.
Average range was 841.91
DJI was 6.59 Trade Periods away from MA.
The range was 15% of the total distance.
A 15% correction would be 22,226.99
DJI Corrected to 23344.5 by March 2018
15% from the January close would be 22227.44.
15% from the January high would be 22624.19
February low was 23360.3
March low was 23509.1
April low was 23344.5
The index made 3 attempts at reaching the predetermined low. With between 720.31 – 1117.06 points remaining.
September 2018, DJI was 3348.1 pts from MA.
Average range was 1144.11 or 2.92 Trade Periods away from MA.
Using pre-2018 averages of 841.91.
DJI was 3.97 Trade Periods away from MA.
The range was 25% of the total distance.
The DJI lost 15% of it’s value off the corrective close of October 2018
25% from the October high was 20213.85. The correction stopped at 21712.5
January 2019, DJI was 2342.1 pts from MA.
Average range was 1634.
Using pre-2018 averages of 841.91
DJI was 2.78 Trade Periods away from MA.
The range was 35% of the total distance.
A 35% correction would be 18366.4
The DJI lost 35% of it’s value off the corrective close of January 2020
35% from the February high was 19219.59. The correction stopped at 18213.7
Correction completed.
November 2020, DJI was 3200.4 pts from MA.
Average range was 2422.34.
Using pre-2018 averages of 841.91
DJI was 3.8 Trade Periods away from MA.
The range was 26% of the total distance.
A 26% correction from a November close would be 21932.56
We haven’t had our corrective close yet. December appears to be moving further away from the MA. This will increase the percentage of the correction.
Why use pre-2018 range averages? Because the ranges we are current generating are unsustainable. 2422 range every month is too volatile. The ranges have been expanding every month of 2020 from the beginning of the year with 1634 points (~2x pre-2018 averages) to November with 2422 points (~ 3x pre-2018 averages). The average range from 2010 – 2017 averaged 842 points per month. That reflects an unsustainable increase of 287%. Especially when our economy is being damaged by COVID.
This year, as of 6 Dec 2020, we have had a range of 12,004 points form current high to low. This is 2x the range of 2019. It has formed an engulfing bar. If we were to use the engulfing bar as a “trigger event”, as of 6 Dec 2020 it would signal that we are going to increase to 37,636.47
Historically, whenever a bar exceeds the previous bars range by greater than 1.5x, the following bar (2021) is an “adjustment bar” that would be between the high and low of the engulfing bar. 2021 may not see a new high. But it also shouldn’t go lower than 2020.
Also, historically, there has been an average 18.34% growth rate in the high to low range year over year since 1916. With a 10 year growth rate of ~125.49% in the range.
With this in mind, the range for 2020 should have been between 5959 point – 7051 points (5959 being 2019 range and 7051 being 18.34% increase) Not ~201% increase in the range.
The range from 2010 – 2020 should have averaged to ~2382.92 points per year. Not the 5959 we saw in 2019 and definitely not the 12004 points so far in 2020.
We are about to correct. Probably see the historical high in December 2020 before the correction starts in late January/February 2021.
Possible December High near 32060.34
This will be a danger zone.
The index will be 5420 points away from it’s moving average. 2.25x trading periods from the MA (if using current averages). Or 6.43 away if using pre-2018 averages. The 2018 correction was 6.59x away when it began.
Probable Scenario: December high = 32060.34
December 2020, DJI is 5420 points away from the MA.
Average range is 2406.67
Using pre-2018 averages of 841.91
DJI is 6.43 Trade Periods away from MA.
The range is 15.53% of the total distance.
A 15% correction from a December high of 32060.34 would be 4809.05 points.
With a possible low of 27251.29.
However, if the increased volatility and ranges maintain.
The existing range of 2406.67 points is 44% of the distance.
A 44% correction from December high of 32060.34 would be 14,106 points.
With a possible low of 17,954.34.
I would anticipate a “slowing effect” to begin to occur between the mean of the March 2020 bar (22658) and the March 2020 low (18213). However, the climb back up this time will not be accomplished in less than a year as it will completely wipe out many corporations and possibly stall the American economy for the next decade.
The indexes are more than likely going to stall for the next decade. It appears as if someone is stopping the engine of the world while someone else is whispering in the ear of Atlas telling him it is time to shrug.
Orion Price Prophet 