Monday, May 17, 2010

Dow 8150?

Stockmarket618   wrote this weekend:

DOW daily chart shows the ongoing technical damage from the bearish broadening top.

After a bounce last week from the oversold crash levels – the daily chart now indicates the newly established downtrend can resume.

As mentioned numerous times, the overextended rally from March 2009 had become increasingly unstable and the recent explosive move is the unfortunate result.

Global indexes displayed similar behaviour in 2007.

DOW weekly chart is now neutral to bearish and I still expect it to turn down.

Next key support is approx 10,000 but it will be breached.

Target for this down leg remains 8,150 but this level won’t hold.

Long term ch6arts of key equity indexes continue to give bearish warnings and the March 2009 lows will be breached according to my analysis.
What 618 is detecting is the lack of liquidity in the system since the Fed stopped printing money in March 2009, and it is not clear they will resume printing anytime soon. A combination of earlier money printing and a dead cat bounce from crisis lows has fueled the rally. That rally appears to be over. Unless their is aggressive, sustained money printing, the forecasts of  618 of a Dow below 8150 are likely to be spot on.


  1. Maybe...but this doesn't look like a deadcat bounce. Even a correction to 8100 which is a 2/3rds retracement of the uptrend which began in March, 2009 is still within historical patterns and would leave a potential long-term uptrend in place. Fundamentally I think you give the FED and the govt. stimulus too much credit for this recovery. The stimulus was targeted to special interest groups (mostly state govts) and had no net positive impact, it was just another political expense. While the FED's increase/decrease of credit can have an impact they are not the only credit creation game in town. And interest rates are ultimately set by the market as consumers/investors continuously adjust the ratio of their short-term/long-term demand for goods according to their own subjective values.

    With over 6 billion people on the planet, the FED can fool some of the people all of the time and all of the people some of the time (as in the RE bubble we continue to emerge from) but it can't fool all the people all the time. we will "listen to the bloodless verdict of the market" and see.

  2. Dow 8000, Gold 8000? I could live with that.