Dow Analysis July 2015 (D,M)
Created on Sunday, 28 June 2015 03:53
Written by Austin Galt
The all time high at 18351 on the cash index and around 18365 on the continuous contract was identified on the day it took place with an email update and then with some analysis on the day after once more confidence was instilled by the intraday pattern of trading.
Now we are looking for a secondary high before a big move to the downside can really let loose. Let’s analyse the technicals using the daily and monthly charts.
DOW DAILY CHART
I have outlined the 7 point broadening top, denoted by the numbers 1 to 7, that we were previously following. This is a very bearish and the pattern now looks complete after price recently made a lower low at 17698 which was below the point 6 low.
So, we look to have completed the first move down in a new bear market but need a lower high to confirm that. Price looks to be tracing out the first bear market rally in an ABC corrective move. Wave A is in place while wave B is in place or will be shortly. Then it is just a case of waiting for the wave C high to form.
Where is this lower high likely to be?
The first rally in a new bear market often makes a deep retracement and that is my expectation here. I have added Fibonacci retracement levels of the move down from all time high to recent low. The point A high was just below the 76.4% level which stands at 18197 while I favour the final point C rally high to challenge the 88.6% level at 18276. I suspect price will fall just short of that level however.
Personally, I am targeting around 18250-18270 to bring in the secondary high.
The Bollinger Bands show the lower low was at support from the lower band while the point A high was at resistance from the upper band. The point B low looks to be finding support at the middle band and I favour this providing the springboard for price to launch back up to the upper band one last time to put in the point C high.
The RSI showed multiple bearish divergences at the all time high and then a new low at the recent lower price low. This is bearish.
Also, the Greek debt situation looks set to move the market one way or another come the end of June and start of July. Taking into consideration my view of the technicals, I favour the Greek debt problems being resolved for the time being at least which should see price rally up to my secondary high target levels. That should be the fake out move as it is too obvious. Once the secondary high is in place I expect a big downtrend to unfold.
Let’s move on to the monthly chart.
DOW MONTHLY CHART
The all time high was right at resistance from the upper channel line of the Andrew’s Pitchfork which I have drawn. This is a very valid area for price to turn back down and while still very early days this looks to be on the money.
The Bollinger Bands show price is starting to leave the upper band and I expect price will just whoosh by the middle band and drop pretty much directly to the lower band.
The PSAR indicator is still bullish with the dots underneath price. These dots will be around 17375 in July and I expect price to challenge and most likely crack that support. That means I expect price to get smashed in July.
As for the lower indicators, the RSI shows a triple bearish divergence at the all time high, the MACD indicator is now bearish after multiple bearish divergences while the Momentum indicator shows momentum declining ever since the end of 2009.
As for where I expect the final low to be, I must admit to becoming less bearish and of all the stock markets I cover the Dow is probably the one I am least bearish about.
I have drawn a horizontal line denoting the 2007 high at 14198 and while that level may provide temporary support I fully expect price to trade below there as it gives that support level a thorough test.
I have added Fibonacci retracement levels of the move up from 2009 low to all time high and my minimum expectation for price is to get to at least the 38.2% level at 13812 while I am starting to think price may pull up before it gets to the 50% level at 12410 - perhaps somewhere in between such as around 13100?? A low above the 50% level would keep the massive bull trend in a strong position as I expect a move to new all time highs in the years following that low.
For now, I expect a serious move down that will eventually get the majority to believe Armageddon has arrived. But no, as outlined in previous analysis, I don’t expect that event until the next decade.