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Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: ftth who wrote (185)	1/12/1998 1:39:00 AM
From: HeyRainier	Read Replies (1) \| Respond to of 1720

[ DJIA TA Observations ] Sometime before my vacation to California I mentioned that I wanted to make some technical observations on the Dow Jones Industrial Average. Upon the request of Peg Coleman, I have decided to post those observations here today: The DJIA hit an all-time high of 8340 on 8/7/97, and began its downward spiral since then. From this point on, to 10/7/97 and 10/8/97, the upper boundary of a downward sloping resistance level was developed. If you drew your trendline properly, you will notice that on 12/5/97 and 12/6/97 the DJIA temporarily made an attempt to break past the previously established resistance line, but to no avail. The failure to break out was characterized as a Failed Signal, a term you should have heard me mention on numerous occasions by now. On its failed ability to break out, an immediate short-sell signal was triggered. To add to the near term bearishness, the market rallied weakly and formed a Bearish Flag. The upper and lower boundaries of the price action from 12/12/97 through 12/17/97 make up the Bearish Flag. Note that a flag often forms in the direction counter to the underlying trend, with an expected breakout in the direction opposite the Flag's direction. Don't worry, it sounds confusing because it is. The best way to grasp the concept is to actually look at the chart. We had the downside breakout from the Flag on 12/18/97, but rallied shortly afterwards to make another attempt at breaking past the now-established resistance level. On 1/5/98 the DJIA again made an attempt to approach the resistance level, but was countered by selling. By the end of the day, the price action formed a Black Spinning Top in candlestick terms. This sign of indecision, combined with the fact that the market was at an established resistance level, made the continuation of the downward trend a very real possibility. Resistance Traders who went short the market must have been having a great time, for the Dow dropped approximately 400 points afterwards. The market has now fallen and closed below its 200 dma, a typically dangerous sign, but over the past few months, each following day had always managed to close above the critical level once again. If we do not get a vote of confidence in tomorrow's market (i.e. a bounce), then there will be an additional 200 point risk to the market, to approximately 7350 for the Dow. Due to time constraints, I will not post TA observations on the S&P 500, nor the Nasdaq. Any comments or observations are invited. Regards, Rainier