Louis - A hypothesis for you, if I may - sorry but I don't have an annotated graph to post, but it's relatively simple so please bear with me.
On an INDU 6 month log scale, draw a downward sloping upper trend channel line along the April-May-August highs. Then draw the parallel lower trend channel line that also connect the March and September lows.
An old school chartist like me might expect this rally to end (at the latest) at the upper trend line, which coincidentally plots out to around the MA100 just shy of 10000. The MA100 is the same level where INDU also failed to advance in July and early August, confirming the current broader downtrend. If one views that 10000 might represent a psychological barrier as well, it just adds to the resistance argument.
I'll admit to being surprised that the Dow has been this resilient so far, and being neutral has panned out to be better than short. But current rally action or not, we're a long way away from busting out of the above-noted downtrend channel. Muscling up to the MA1000 would likely exhaust the remaining power still apparent in the stochs, Williams, etc.
So the question is this - do you think we really have a chance of getting as far as the MA100, or do we start to edge the shorts in now on spec that we will turn south before getting to the upper trendline (which would mean that overall, INDU would be weaker than it looks)?
Not looking for any crystal balls, just looking for an evaluation of my hypothesis based on indicators you might be looking at which may not be the same as mine. |
