Archive for DJ30
Original accessment that Dow would consolidate between Y-0 and Y+1 was correct for the first part of the week. Then the b.s. gap up in mid-week failed to pop the market higher. Dow flushed back down to fill the gap below. Closed the week below Y-0 and near week low.
Looking for further downside to create a swing bottom at Y-1 down to B-2. Dow can go lower than that but not necessary.
The rare case scenario is that Dow popping higher above B-0 quickly and B-0 acting as support. That can launch Dow up to B+2 in a few weeks.
First time since beginning of the year where Y-0 acted as resistance and gave us a selloff down to my target area 14800-14900. As I warned last week, beware of government intervention and got just that to zoom everything higher at the expense of trashing US dollar. Closed the week above Y-1 and midpoint.
The first big challenge of the managed market environment coming this week.
Although the coordinated effort to pop the stock markets worldwide worked like a charm last week, it cannot stop the market from going down again unless more intervention is coming. The way the unloading of stocks over the past month implies major players are no longer interested in the stock market.
As long as these money are not coming back into the stock market, it will not be able to produce a stable environment for stocks to go higher for prolonged period of time.
This week Dow should consolidate within B+1 and B-0. Once the short term overbought condition is neutralize, as long as Dow is still holding above B-0, it can go higher.
Amazing gap up on Tusday that induced heavy selling in the underlying stocks all day. The reject of Y+1 was clean and that leads to Y-1 target. Dow then spent the next 2 days printing a bear flag. By Friday the Y-0 resistance was confirmed and a flush to Y-1 has completed. Closed the week below Y-1 and at week low.
Blow-off top from the week before last was almost invalidated last Tusday when the governments intervened over the long weekend. Instead of business as usual like the past several months, Dow closed at the low of the week confirming the topping signal.
2 bearish scenarios emerged from this really messed up swings.
First, double top formation points to a drop to 14800 area.
Second, multiple legs pullback where 2 legs are already done with the 3 one starting from 15200 will give us 14900.
All government officials and central bankers will do what they do best this week to stop Dow from going below 15000 unless they are willing to admit what they are doing now is wrong. Would they?
So beware of that if you are playing the short side.
Dow zoomed up on no volume initially and exploded to Y+2 with a sharp reversal. Signature blowoff top in place pointing to a drop back down to Y-0. With just one quick seloff we got Y-0 already. Dow then entered consolidation since. Closed the week above Y-0 and midpoint midpoint.
A move back up to Y+1 / B-0 to rechallenge the original topping zone is possible but not necessary.
Expect consolidation between B-0 down to B-1 until another event triggering a breakout. Slight bias towards a drop back down to 15000 as long as B-0 acting as resistance.
I have written earlier this year about the Chinese lunar / solar cycle in Year of the Snake and the Chinese 19-Year Lunar Cycle. It is interesting to review the chart right now as it has marked the swing turns of this year so far quite remarkably.
As mentioned before, I am not a fan of astrology, it is quite difficult for me to accept that this chart has actual projection value. But given what happened so far, it has done a pretty good job in highlighting the swing tops and bottoms this year.
Going forward, the projection points to:
1. a significant decline should start now and that it should lead to a selloff ending sometime in mid June
2. a rally into August with another all time high
3. major selloff all the way into December
It will be interesting to see how the stock markets unfold going forward.
The sarcastic question I asked last week was answered. Dow held previous week close and zoomed higher. Closed the week at Y+3 and week high.
Widest weekly range for quite some time. Every resistance nearby are taken out. Many long term bears have finally turned bullish and the ultra bulls are coming out to say the bull market is not over. This, is the sign that the majority of the bull run has been completed.
Not the best environment to go short but not the time to stay bullish either.
A break of the uptrend line supporting Dow so far across multiple weeks points to a drop back down to at least Y+1. It is significant because that alone is 200+ points already.
No retest of the support trendline. Instead, follow thru with another straight up rally for 4 days in a row. Found resistance near Y+2. Closed the week above midpoint and Y+1.
Retest of B+1 or going higher to tag Y+2 is normal. The problem is that Dow has pretty much exhausted all its buying power with almost no support within nearest 200 points. It has setup itself for a nasty drop to at least B-2.
Of course, as everyone already know, any significant drop will have to be subjected to the mercy of Fed. But what if someone bad happens that Bennie and friends have not anticipated?
Dow break above Y+1 early in the week points to the potential to tag Y+2 later. It was done with another huge gap to the upside. Closed the week above Y+2 and near week high.
A clear up trendline support is now defined from the price actions over past 2 weeks. If Dow fails to go higher early this week, a pullback to fill the gap below is very likely. The support trendline may be retest at the same time when the gap is filled.
As expected, a bounce to Y-0 could not be avoided and that it would not stop the bounce also materialized. The interesting thing is that it was done through another large gap up to clear the Y-0 resistance, yet the gap was closed not because of a normal selloff, but a false report that White House was bombed. Closed the week above Y-0 and midpoint.
No long term direction has established yet. Volatility on weekly basis, it is 2nd week in a row with tighten range. Compression means eventually the original boundary will be tested. As Y-1 was tested and held, it means the year high could be next.
Notice the remaining gap above and the original open gap below (if we ignore the 2-min crash) are about equal distance from close of this week. This is the equalibrium zone. Once Dow can move above B+1, a zoom to fill the gap above will happen. The opposite is true too – once Dow breaks B-0, it will have no choice but to flush down to fill the gap below and likely B-1 too.
Major selling actions witnessed last week. The rally of the week prior to last one was erased completely. Closed the week above Y-1 and below midpoint.
As oppose to closing below Y-1 to confirm the failure of the blowoff rally, we only got a selloff back down to March close. That means the bulls have not givne up the fight to go higher. Normal market condition B-0 should act as resistance where Dow will continue to go lower as long as that is not breached.
The problem with that scenario is that if Dow is strong enough to challenge B-0, PPT will ensure that it does not stop there as short sellers are very predictable which price level they are going to act.
Hence, for further selling, Dow has to drop quickly down to B-2 first or this selloff may just bottom out right here.