Trading Tutor Market Letter Sample

by Larry Pesavento

Week of October 8th, 2007

As you know, we put a great deal of emphasis on the astro harmonic cycle dates that occurred in the stock market between August 13th and August 23rd. These events only happen every decade or so in such close harmony. The next one doesn't happen until 2017. Using the Bradley model as a benchmark of economic activity, I shifted it to the left so that the low on August 16th would be at the bottom of the Bradley model. The reason for doing this is that the Bradley model can be calculated many decades in advance. It does not consider the price action of the stock market so if we assume that the actual bottom came on August 16th, we find if we shift the model to the left, you can see that we are very near a major top in the stock market. Whether this is true or not we will not know for certain until later this week.

I feel quite strongly that we are near at least a minor correction and potentially a major correction. Here are the following reasons for this assumption.

  1. The Bradley model may be calling a top, if not now, then within the next 8 days.

  2. The NASDAQ has completed a major Butterfly pattern.

  3. The S&P cash index had a large gap up on Friday and these gaps will usually be filled within a few days.

  4. The cash S&P also exceeded the highs on July 19th and could also be forming a double top which is also occurring in the Dow Jones Industrial Average. Double tops are not uncommon in the Dow Jones, as you can see one occurred at the top on July 19th before the sub prime debacle.

  5. The VIX Index of Volatility has come back to the . 618 retracement and volatility should start to increase shortly.

  6. There are many AB=CD patterns completing in many of the index's.

  7. The Dow Jones Transportation Index and the Dow Jones Utility Index are both completing a Bearish Gartley showing a major divergence in the Dow Jones Industrials Vs the Dow Jones Utilities and Transports.

Classical Dow Theory suggests that this is a major warning sign as all indices should be making new highs within a relatively short time of one another.

Finally, the subprime debacle disappeared to quickly in my opinion. Something was there that scared the Fed to drop interest rates not just once, but twice. I can remember the famous words from the great investor Bernard Baruch from the 1930s, "the stock market exists to fool the most amount of people for the longest period of time."

Here are some ideas that you should consider from my years of following these markets and historically looking at 100s of years of market actions.

Caveat Emptor

If the stock market is strong this week most of these assumptions will be wrong.

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