DOW UPDATE: (REVISED via % errors)
DOW UPDATE: Monday Dec 20th: DOW closed down -113 to close below first support DOW 11,150 to finish at DOW 11,144.27. A second close below DOW 11,150, and more importantly if this second close tomorrow is below DOW 11,050, will confirm for me no new DOW highs in '99 and correction dead ahead with BKX close at or below BKX 737 the deadly combination. However, if today is one day false break below DOW 11,150, and tomorrow we close back above DOW 11,220 with BKX close at or above BKX 753, then DOW new highs are within reach with DOW 11,665 the top.
So tomorrow, will tilt the scales one way or the other: for the bulls for remainder of the year if this last chance '99 rally materializes on the wings of NDX and New age issues; or if the bears regain control on deteriorating broad market breadth, decaying rate sensitive issues BKX, UTIL, TRAN and finally escalating higher bond yields as we head toward the new millennium.
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Friday's DOW intraday action was important for several reasons.
One, MITA 1,916 first established initial new virgin resistance at this DOW 11,390 once DOW 11,310 intraday got taken out:
..<DOW resistance is really DOW 11,310 and if we take this level the old high DOW 11,326 will be left in the dust as roadrunner beep beep bull will smell blood and fear of loss sets in and the fuel will be set to the fire for this updraft. DOW 11,390 first new upside virgin territory>...
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On Friday, we hit an intraday high of DOW 11,384 short of 11,390 and abruptly reversed as triple witch and profit taking quickly erased major early gains. Not only were we above all time closing highs of DOW 11,326 set on Aug 25th, but more importantly we managed to swoon badly well below this level to close at DOW 11,257. In short, after trading 58 points above previous all time highs, we finished 69 points below all time Aug 25 closing highs. This was then followed with next trading day (today) breaking first support DOW 11,150. Back to back technical failure. Will this continue?
Second, we must compare current DOW "theoretical"intraday high (DOW 11,497.20)on Friday Dec 17 and the failed new high close to similar previous period in the past. "Theoretical intraday high" more clearly measures internal implied volatility and is early warning sign of distribution and selling shares into a top. Also, what type of DOW action followed immediately thereafter and how long it took to break through previously established all time highs.
Look no further than July 17, 1998.
On July 17, 1998, the DOW closed at an all time high of DOW 9,338. Theoretical intraday high on the DOW was DOW 9,412.60 The market then ran out of gas and a short nasty correction immediately ensued.
We got as low as DOW 7,539 close on Aug 31, 1998. Roughly a 19.3% correction in a month and two weeks from the July 17 high. Further, the theoretical low was 7,379.70 on Sept 1. More importantly, on this date, Sept 1, we closed at DOW 7,827.40 - 288 points higher than the previous close. This Sept 1 theoretical low, moreover, was tested one more time on October 8, 1998 with the theoretical low of DOW 7,399.80. We closed at DOW 7,731.90 and never looked back.
I bring up this small synopsis to get to this point:
It took over four months later on November 23, 1998 that we eclipsed both DOW 9,412 theoretical and DOW 9,338 closing highs from from July 17,1998. November 23 theoretical close was DOW 9,425.80 with a close of DOW 9,374.80. The next day, Nov 24th, we registered a higher theoretical high of DOW 9,458 but closed below old July 17 highs 9,338 to close at DOW 9,301.20.
Study this link and key on July 17 and November 23 and 24 with supporting numbers after it and you will know what I am talking about:
chart.yahoo.com.
Finally, from the point we turned back down on November 24th, it took us about another 1 1/2 months and until January 6, 1999 until we finally broke out once and for all. DOW hit new all time high closing and theoretical high of DOW(CH)9,545 and DOW(TH)9,608 respectively.
The pullback lows registered in this brief adjustment is 7.24% from DOW 9,374 Nov 23 to DOW 8,695 on Dec 14th.
So for comparative analysis, a DOW new potential closing high from say DOW 11,400 and 7.24% pullback is roughly this DOW 10,520 between now and Feb before we potentially launch to new highs again. If we use Friday's theoretical high of DOW 11,497 we get DOW 10,610.
Worst case scenario, 19% nasty correction from DOW 11,400 is DOW 9,235. From theoretical Friday DOW 11,497 high we get DOW 9,310.
Study this link for further detailed analysis Nov 23/24, Jan 6, Mar 5 etc:
chart.yahoo.com.
Just some musings to get the professor thinking and back to the drawing board. <g>
Best Regards, J.T.
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