What I'm seeing:
- Trendline 1 and 2 NOT breached.
- Trendline 3 NOT breached yet (no closes below that line to date), but more on this below
- Trendline 4 breached in Aug 2001, but DOW resumed its uptrend after retracing slightly more than 50% in the 1st quarter of 2003
- Trendline 5 breached during last week of Sept this year.
BAD NEWS:
Given that what DOW has punched through is a weekly trendline (trendline 5), the likelihood that it's going to continue to fall is high (at least that's what I'm going to assume for now)
Using trendline 5 as the neckline to measure how far DOW will fall, the estimated target is around 5210 [ 9914 - (14,198 - 9494)].
By the time that DOW drops to that level, and closes below that, it would officially have breached trendline 1.... (I'm going to have to stop projecting beyond that before I fall off my chair....)
Consolation:
As DOW has broken out of an Uptrend line, volume after breakout will have to be trending up to support a substantial drop.
The way I see it is that volume is not exactly on an uptrend after breakout. So there's HOPE that things could get better afterall? (With the Fed's money printing machine starting to go in full force again, I'm keeping my hopes HIGH in the short-term...of course that would mean a depreciation of the USD is imminent...which means that I can now SHORT THE USD...which is exactly what I'm doing now anyway)
As it is now, DOW is seen to be testing the high (after breakout) of around 9800...
GOOD NEWS:
Although DOW has breached trendline 5, it's NOT breached trendline 3, and it's not known if we are looking at a trend reversal or merely a correction (to date, DOW has retraced about 50% from beginning of trendline 3) looking at the period spanning 1991 and the present.
In fact, anyone looking to short the market after DOW's breakout from trendline 5 would be wise to wait for DOW to:
a) first test the high (after breakout) of 9655 to 9800, and having tested that,
b) to fall below approx. 7445 (red solid line in chart above)
Personally, unless both conditions a) and b) have been fulfilled, I won't be comfortable taking short positions (except in scalping of course) from this point on, not with trendline 3 apparently providing some sort of support...
Now, the REALLY BAD NEWS:
Should DOW punch through trendline 3, and fulfill the conditions for a trend reversal (points (a) and (b) above shows how I would qualify a confirmed reversal), we'll find DOW all the way down at 1040 (which effectively brings us back to 1983, when DOW first took off from its base and went on a parabolic ascend without looking back even once).
I'm PRAYING for DOW to climb back up to hit at least 9800, and stay up there for a while...if it doesn't, the future's going to be pretty bleak for everyone on planet earth.
- Trendline 1 and 2 NOT breached.
- Trendline 3 NOT breached yet (no closes below that line to date), but more on this below
- Trendline 4 breached in Aug 2001, but DOW resumed its uptrend after retracing slightly more than 50% in the 1st quarter of 2003
- Trendline 5 breached during last week of Sept this year.
BAD NEWS:
Given that what DOW has punched through is a weekly trendline (trendline 5), the likelihood that it's going to continue to fall is high (at least that's what I'm going to assume for now)
Using trendline 5 as the neckline to measure how far DOW will fall, the estimated target is around 5210 [ 9914 - (14,198 - 9494)].
By the time that DOW drops to that level, and closes below that, it would officially have breached trendline 1.... (I'm going to have to stop projecting beyond that before I fall off my chair....)
Consolation:
As DOW has broken out of an Uptrend line, volume after breakout will have to be trending up to support a substantial drop.
The way I see it is that volume is not exactly on an uptrend after breakout. So there's HOPE that things could get better afterall? (With the Fed's money printing machine starting to go in full force again, I'm keeping my hopes HIGH in the short-term...of course that would mean a depreciation of the USD is imminent...which means that I can now SHORT THE USD...which is exactly what I'm doing now anyway)
As it is now, DOW is seen to be testing the high (after breakout) of around 9800...
GOOD NEWS:
Although DOW has breached trendline 5, it's NOT breached trendline 3, and it's not known if we are looking at a trend reversal or merely a correction (to date, DOW has retraced about 50% from beginning of trendline 3) looking at the period spanning 1991 and the present.
In fact, anyone looking to short the market after DOW's breakout from trendline 5 would be wise to wait for DOW to:
a) first test the high (after breakout) of 9655 to 9800, and having tested that,
b) to fall below approx. 7445 (red solid line in chart above)
Personally, unless both conditions a) and b) have been fulfilled, I won't be comfortable taking short positions (except in scalping of course) from this point on, not with trendline 3 apparently providing some sort of support...
Now, the REALLY BAD NEWS:
Should DOW punch through trendline 3, and fulfill the conditions for a trend reversal (points (a) and (b) above shows how I would qualify a confirmed reversal), we'll find DOW all the way down at 1040 (which effectively brings us back to 1983, when DOW first took off from its base and went on a parabolic ascend without looking back even once).
I'm PRAYING for DOW to climb back up to hit at least 9800, and stay up there for a while...if it doesn't, the future's going to be pretty bleak for everyone on planet earth.
2 comments:
Hi Jules,
Very nice analysis. Although I do not track DOW much, if I consider those trend lines, then 5K is inevitable. The fundamental reasons for my views are in my latest post in my blog. If you read it DO NOT MISS THE LINK TO DIMITRY ORLOV'S article.
Thanks for sharing, Harry :-)
Orlov's a funny guy. So funny that it's difficult for me to take him seriously LOL!
Ok, seriously, he SEEMS to have made some valid points, and it's an interesting read... but I'll stop at that :-)
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