More Drivel (by Nathaniel Goodwin)

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I've been wasting most of the day browsing and was about to check out some of my favorite adult sites, but then I thought my time would probably be better spent looking at some charts.

Something I like to keep in the back of my mind right now is called the Fan Principle.

In corrective / intermediate trends, which many think we have been in since March (if you believe in the new "bull market", just skip this post), where the advance has pretty much been a straight-line orderly return; the Fan Principle might be a good tool to gauge when the correction is over.

First we need to find three good trend lines to make our fan, ones that contain the price action. After fan 1 is broken, prices come back but does not penetrate it. Then fan 2 is broken, price comes back but does not penetrate it. Now we are looking at fan 3. Once fan 3 is broken decisively usually on higher volume, the top has probably been seen according to the Fan Principle. The move creates some sort of "rounding top".

Just like anything, there are exceptions to this rule and it doesn't mean we can't have more strong rallies over the next few weeks. Just one more thing to keep in mind as we move sideways here. "Long-term" investors should really take note of this; it is giving us warning signals.

I told my mom to speak with her financial adviser, and maybe pull some of her money out of the market (I've been telling her that since June-July and she says I sound like a real douche when I say this). Mom never listens to me, but at least she agreed to meet with him again.