Wednesday, June 9, 2010

In Limbo Until June 14th?

Tonight a chart of the Dow Industrials will be used. The reason the Dow chart is being used is because there was a bullish engulfing line formed at the close--albeit a rather unconvincing one due to the relatively small difference between the bodies of today's and yesterday's candles. Nonetheless, considering that the market is significantly oversold on a technical basis and that both the RSI and MACD Histogram are showing divergent formations, a rally of some kind cannot be ruled out. I suspect that if a rally does ensue it will not deteriorate the overall bearish intermediate trend of the market.
Points of interest:
  • The R line has acted as resistance since the high of April 26th. This week this resistance line will decline from 10100 to 10000. It is rare that a market stays below the R line (1X1) for long periods of time--except in crash scenarios.
  • The R line from the mid-February peak(10438.55) has recently contained the decline--resistance becoming support.
  • The 21 day exponential moving average is close to the 200 day ema. The energy of these two averages in close proximity could support prices temporarily.
  • The ADX is above the -DI which often portends an imminent change in the short term trend in the markets.
  • A brief rally to mollify the over-sold condition of the market could possibly set things up for a sensational decline that could be relentless for several weeks--or months.
  • The markets are entering the window where many cycles will be synergistic, which could result in some unprecedented market activity. From now until the end of August could be full of nasty surprises.
June 14th is an interesting Date since it is:
  • 34 trading days from the April 26th High
  • The time from the April 26th to June 14th is 61.8% of the time from the February 5th low to April 26th.
What the market does between now and June 14th is anybody's guess--but if the markets were to rally into that date, there will be a high probability of a subsequent turn to the downside--which could become vicious. Conversely, if the markets continue to decline, June 14th may represent a short term low. The June 17-21 Energy Date period could represent a period of great volatility in the markets.
click to enlarge

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