Dow: 13 Weeks consolidation is likely to end!

Dow Jones Industrial Average (8599) Near term trend: Down

For the last 13 weeks Dow is stuck in the trading range of 8k-9k, with significant resistance near >9k. The week ended 10th October 2008 has seen a massive fall from 10322 to 7882 i.e 23.6% fall within a week(pointed by blue arrow on the chart). Interestingly, the subsequent 13 weeks(from 10th Oct) trading is perfectly within the range of this single week's trading. This proves (once again) that despite of several attempts the bulls are weak & there 'energy' is being digested/sucked by the strong enemy within the small trading range. Now after constant failure to push up the market above 9-9.4k, bulls are likely to 'surrender' . Remember that we have already consumed "13" weeks, a Fibonacci number., in a sideways (counter trend) trading. The next week, failure to trade above 8.9k will lead to reversal in the trend with initial objective to test 8k & then Oct low.

Dow -Hesitating near 9.4k!

Dow Jones Industrial Average (9360) Near term trend: Sideways

In last week's analysis, we had argued in 'favor' of recovery (at least time being) & shown how Dow is close to critical support zone of 7.7-7.9k based on a)200 months moving average b) lower end support of perfect falling channel. And also mentioned importance of a week based on Fibonacci time cycle - 55th week since absolute top.

The Dow gained over 11% during the week & thereby successfully "arrested" the downfall of the last few weeks. However after initial gains, the bulls are making "hesitant" moves near 9.3-9.4k mark. Failure to sustain above it could potentially lead to "retest" of 8.8-8.6k area(most expected) where expect a renewed buying interest by "strong hands". On the other hand, bullish possibility (only) exist if posted fresh gains above 9.4k, which may lead to 10k or higher(least expected). In nutshell, the downfall is arrested, however, after initial up move expect a shakeout in the 'range' (8.6k-9.4k) before unfolding benign up move lasting 5-7 weeks.

Dow (still) above 7.7k......Advantage bulls??

Dow Jones Industrial Average- (8378): Near term Trend : Bearish (Impending corrective rally). Last week Dow lost just over 5.4% and manage to float above the panic low of 7.7k(10th Oct) despite of a rout in the global equity markets. Is it a signal of strenght? Since Oct 2007 it has lost more than 45% value & the current week is 55th week from the absolute top of 14k. Being a Fibonacci number (55) the current week could lead to a "important" reversal (at least time being) if the bulls swung back in action, preferably with a "weekly close" above 8.9k.On the Monthly chart, 200 'months' (not days) moving average (current months value 8.8k) has provided "excellent" base formation (support) in the year 1978-1982 (see monthly chart). Now in this month, first time since 1982, the Dow has once again fallen back to this "long term" support line. In short, the level around 8.8k could emerge as a significant "support" zone for the index, at least in the immediate near future.

On the weekly chart, since top, the Dow is moving in perfect falling parallel channel (see dotted line on the weekly chart) & in this month it has bounced back 3 times from the lower end of the parallel channel (for the current week value is around 7.9k). This suggests at 'halt' in the downtrend OR a temporary respite for the bulls, provided the Index managed to float above 7.7k-7.9k.There is another possibility of a "Expanding" triangle (marked in dark line on weekly chart) formation on weekly charts, with last 'e' leg has ended at 7.7k.All these observations suggests a "fair" chance of 'recovery' in Dow provided it able to move above 8.9k on a weekly closeing basis. At the same time it is equally difficult task to take call on whether this is corrective rally or a 'end of the worst". Lets see how the things unfolds in the next few weeks/months.