CHARTING TRENDS: Stock Bulls Bowled Over
24 Jan 16:56
By Stephen Cox, CMT
A Dow Jones Newswires Column
NEW YORK (Dow Jones)--The stock market's latest long-term corrective uptrend
fell apart completely Friday. The bulls have a chance at a rally come Monday,
but it will be cold comfort because the technical damage has been done.
Friday's heavy selloff has greatly increased the chance that the long-term
bear market that began in early 2000 will be extended this year - sooner than
later.
The rout began Friday morning when the Dow Jones Industrial Average slipped
below 8242.91, the December low. The subsequent loss of 238.46 points means
that the average has given up half of the gains of its smart October - December
rally, from 7197.49 to 9043.37. The DJIA is now pointed down to target support
somewhere in a wide band between 7835.92 and 7579.70. Given the long-term bear
market, a move to those levels will probably be the first step in an eventual
drop below 7197.49, to new bear market lows.
It's notable for now that the Friday low, 8112.43, is strong bounce-point
support on the charts. In other words, a higher Monday opening would set the
average up for a rally back up to that 8242.91 number. The rally, alas for the
bulls, would probably be a teaser ahead of the next big leg down.
10-Year Treasurys Are The Key
The prospect of a rally may depend on the CBOT nearby 10-year T-note. It's
bullish, but it settled Friday practically at 114-25 monthly resistance. A
lower Monday opening implies a dip as low as 113-16 before the price bulls once
again take over the market. The development could easily touch off a
corrective rally in stocks.
Of course an opening above 114-25 would be another setback for the stock
market. In that case the nearby 10-year would be on the way to long-term
resistance at 116-16.
Dollar Retreats As Euro Charges
The dollar, on the other hand, weakened considerably on Friday, and that's
likewise a worrisome development for the stock bulls.
The euro blew past $1.0789 resistance Friday morning, and now a test of
$1.0923 is probably in the bag. Look for a brief pullback when that level is
tested. Even so, the euro will be well on the way to $1.1029, minimum.
For more technical analysis see: Dow Jones Newswires, N/DJTA; Telerate, page
4247; 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 Bridge\CRB
(END) Dow Jones Newswires
01-24-03 1656ET |
