Use Downtrend Channels For Trading  

I’ve been talking about two possible stock market paths.  Either a stock market stuck in a wide, 10% trading range (wide trading ranges are more indicative of a forming top than a consolidation on the way up).  Or a break below the August lows and thus a resumption of the market decline which really began last July (since then we’ve had a 10% drop and a rally back to marginal new highs in October before a second, larger decline).  Over the last week we broke those August closing lows so I figure the 2^nd choice has been proven the correct one (although many are using the intraday lows of August 16^th as the true lows and thus figure we’re still holding up; I don’t).   So I my view is that we’ve just confirmed we’re in a new bear market.  And looking around us at the whole backdrop – the financials, the technicals, the economics, the geopolitics, the excesses, the whole caboodle -- I see it as the worse mix we’ve had in many, many years.  And with more trouble to come out over the next year or two.  Thus we have the correct although awful nexus for a big bad, bear market.  That’s why I’ve been recommending caution and cutting back market exposure since back on November 8^th, when I saw “overwhelming” evidence that the total “weight of the evidence” signaled big trouble ahead.  Schwartz View:  Thus technically, I’m now using the guidelines of some downtrend channels I’ve drawn on my wall charts.  These are downtrend lines drawn off the mid-October false breakout index tops, connecting to the lower tops set the last day or so of October.  Then I draw parallel downtrend lines off the lows before and after the October tops.  Bottom line I now have downward sloping channels which I’m using as my guideposts as to when rallies approximately start and end.  And thus buy and sell price points in a wide saw-tooth downtrend channel to trade off or on rallies to lighten up further on.  I’d suggest the same to you traders.