Charting Money: The Difference In "Sacred" and "Scared"
16 Jan 12:00
By Stephen Cox, CMT
A Dow Jones Newswires Column
NEW YORK (Dow Jones)--Now that the Dow Jones Industrial Average has dipped
below 9836.25, many bullish observers - including me, by the way - will do well
to severely shorten their time perspectives of the market.
That's because a daily close below 9836.25 raises the prospect of move down
to 9154.90, perhaps to 8878.78. Either development would be a routine Fibonacci
retracement of the nearly three-month bull move, roughly. And either one could
ruin the day of an overexuberant long-term bull.
As this column has pointed out many times, corrections of a bull market tend
to be shallow. That's really another way of saying that the market is bullish,
you see. And I note that as DJIA tests 9836.25, its 13-week rate of change
momentum indicator is firming. That, all else equal, implies that support will
hold on a weekly closing basis.
But that's the point. DJIA could take a breathtaking dive before bobbing back
up above 9836.25 late Friday when the week ends.
Finally, a daily close above 9836.25 is a tentative bull signal. It will have
been confirmed only if the average closes above the 13-day exponential moving
average, now at 10035.50, and then above key anchor target resistance at 10043.
Those numbers are practically identical.
The Nasdsaq Composite, now trading around 1960, is still vulnerable to a test
of 1892.88. The signal of that test is a close below 1936. For now, the Naz is
under its moving average, 2011.30, under 2034.55 resistance, and under water.
This analysis sounds guarded because it is. The market may shortly make the
first and biggest correction of its bull move. The bull market isn't immutable;
it will go away for a time and it will return. Presumably, observers want to
return as well. To do that, they have to know the risks.
A Funny Thing Happened On The Way To The Forex
Coincidence, or near-coincidence occurs more often than not in technical
analysis. In fact, it's a technical confirming signal of sorts.
Notice that the spot U.S. Dollar Index took out 117.27 resistance this
morning, and EUR/USD took out 0.8837 - 0.8827 support. Those moves aren't yet
decisive - the day is young - but they square with the technical trends. Now
let's see if the index goes on to test 118.77 resistance as EUR/USD moves down
to first support at 0.8689.
Long-term charts say they will do just that.
To try out the new Charting Markets weekly technical newsletter go to
djnewswires.com
For more technical analysis see: Dow Jones Newswires, N/DJTA; Telerate, page
4073; Bloomberg, NI DJTA; and Reuters key word search "Charting Markets."
-By Stephen Cox; 201-938-2064; stephen.cox@dowjones.com
(Stephen Cox, a chartered market technician, is chief technician for Dow
Jones Newswires.)
(Data by CSI, Commodity Research Bureau)
(END) DOW JONES NEWS 01-16-02
12:00 PM |
