Thursday, 24 May 2012

Dow Jones index re-tests a 75 year old trend line

The Dow Jones Industrial Average has recently re-tested a 75 year old trend line from underneath. The following chart shows to late March, but such is the scale, you don't have to use much imagination to fill in what has happened since. The Dow seemingly kissed goodbye to the upper trend line in early May, and has begun to fall hard. I find it a thing of extreme beauty that the market can respect a 75 year old trend line. However don't let that beauty blind you to the beastly bearish implications if (if) the recent high from the re-test holds. Look out below!

Robert Prechter first showed the above trend channel in 1978 in his book Elliott Wave Principle, and most recently presented it in an up-to-date chart in last weekend's issue of the Elliott Wave Theorist, as just one of 23 beautiful, beautiful, beautiful, yet terrifying charts in that issue.