Take a look at the below weekly chart of the Dow.  Take a close look at the most recent four line channels, the first pair beginning in early 2009, the second pair beginning in mid/early 2010.  I drew these lines about 3 months ago (each channel is truly parallel).  Now take a look at what the market has done since then.  It’s obeying the channels.  This recent market market malaise started when it got to the top of the more recent, narrower channel.  Now notice where it’s heading…right at the convergence of the two separate overlapping channels.  If this doesn’t convince you the market is not random, I don’t know what will.  I find this actually pretty eerie.  But is it predictable?  Absolutely.  Not 100%, but certainly with enough certainty that if one makes the right bets, you can make money.  And good money.  So where’s it going?  From what I can tell…it’s going to break out of the converging tops & bottoms to the upside.  I’m thinking Dow 17,500 by early 2014.   Or, it might drop back into the more recent channel, but I think that’s a lower probability.   And what’s really interesting, by following leading stocks plus these channels you can get a preview of where the market will go short term (next post).

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