INDEX UPDATE
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Steve an excellant analysis.
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Take a look at the the above chart, which I used a line chart to make it a bit clearer, but keep in mind that line charts show the closing prices not the intraday swings.
In the past I mentioned the STAIR-STEP, and on the chart there is one at 9000, then 8600, and now one possibly developing now at 7800.
Steve mentioned in his post that during, what he called, the channel with support at 8350 (Im calling the STAIR-STEP at 8600) there were 2 attempts to break out to the upside which failed.
You will also notice that at the STAIR-STEP at 9000, there were also 2 smaller attempts to breakout to the upside, but also failed.
At the current time, it does appear that we are forming another STAIR-STEP at 7800 which has a support around 7400-7500 and the topside of 8050-8100. It also appears that the DOW is making another attempt to breakout to the upside right now, targeting 8100 range. I feel that such could happen MONDAY.
You will also notice that these spikes up do not last long and sometimes only intraday, as in the first spike to 8710 in the previous STAIR-STEP. If we do test the 8100 mark on MON, watch for a possible strong selloff, almost immediately. If we break 8100 substantially, say by 75-100 points(8175-8200), that could imply that we may be breaking out to the upside.
My SHORT-TERM TECHNICALS are smack in the middle again, with a reading of 53, and mathematically calculated that the upside potential from Friday's close is 300-500 points for my technicals to get to a CLASS SELL status, and a rise of 150-200 would bring it to the OVERBOUGHT region. Therefore it is very possible that we could see 8100 range as soon as Monday.
On Friday around noon, I gave a warning that the ASIAN markets could pop to the upside Sunday night since the JAPAN market formed a double bottom on Friday. We should also watch to see if and by how much JAPAN pops on SUNDAY. If the pop occurs and it is small, there is a fair possibility that the support formed by the double bottom, which is slightly below 14000, could fail to the downside in the near future. One would need to watch the intraday swing in the Japan market and not be fooled by the closing price which one will normally hear from CNBC/media. If the pop is less that 2.5% in the JAPAN market, that should be considered as a possible sign of weakness for the near future. A pop in ASIA should help push our markets up on Monday, regardless of the size of the pop, if it does occur.
Going back to the charts, please notice how the oscillations are getting larger. At the 9000 STAIR-STEP one could see that the oscillations were relatively normal in size. Then they grew larger at the 8600 STAIR-STEP, and now the oscilations are even larger.
The next observation is somewhat discouraging. One will also notice that the first step down was from 900 to 8600 which is 400 points, and that the step from 8600 to 7800 is 800 points. For only mathematical discussion since I am not yet saying it will or wont go that low, a common assumption is that the next step would be 1600 points lower which brings it to 6200. If one uses fibinocci numbers the target would be 6600.
To explain - the top was at 9368 and it was about 400 points to the STAIR-STEP at 9000, then another 400 points to 8600, then 800 points to 7800. The next number if one was to use the fibinocci sequence is 1200. To recap this sequence: 400, 400, 800,1200. The first number is duplicated and thereafter you add the last 2 numbers in the sequence to get the next number. The actual Fibinocci numbers are 1,1,2,3,5,8,13,21,34,55............ Again this is only a mathematical study and I am not saying at this time I believe it will happen, so dont kill the messenger.
For now I am feeling that we could runup hard on Monday. If we do runup and 8100 range holds, I then will expect a large reversal to the downside to retest quickly the 7500 support again, and I suspect it could happen as soon as TUE/WED. If this retest fails in that timeframe, it could be the next major drop which could take the DOW quickly to 7000 range. I believe this upcoming week, SEPT 14-18, could be a most crucial week.
One last thing, if there is no follow-thru on the DOW to the upside on Monday that will also be a big negative for the market, but for now am suspecting that Monday could be up strong.
Seeya |
