Wednesday, 5 September 2012

Global Blue Chip stocks (GDOW) showing Head and Shoulders top and ominous Elliott Wave count

Richard Russell of Dow Theory Letters fame has recently been following and remarking on the GDOW. What is the GDOW? From Wikipedia: (GDOW) is a 150-stock index of corporations from around the world, created by Dow Jones & Company. Only blue-chip stocks are included in the index. In his latest daily Remark Mr Russell noted the potential Head and Shoulders pattern starting in 2009, posting an unlabelled chart of said pattern. I have added labels:

The glaringly obvious thing to me about the GDOW chart was the clear Elliott Wave pattern, which I have labelled below. Under this count, global stocks are just beginning another 3rd wave lower, a cousin to the decline in 2008. Little cousin or big cousin? Time will tell.

ASX 200 bounces off short term trend channel support, but keep an eye on big picture

Following the late August completion of a bearish wedge and the subsequent decline, the ASX 200 today bounced off trend channel support, as illustrated below. A move below today's low would lead to an accelerated decline. Keep in mind the bearish Global big picture.

Zooming out to the long term big picture view of the ASX 200 shows that the August peak coincided (not coincidentally!) with the trend line drawn from the 2007 and 2011 highs. This big picture turn down applies downward pressure to the market as it tests the short term trend line shown in the previous chart.

DAX approaches Head and Shoulders neckline

The first chart shows that the DAX is this evening approaching the neckline of the potential Head and Shoulders top it has formed in recent weeks.

The second chart zooms out to again show the recurring trend line angle I illustrated earlier in the week, which appears to have turned the market lower (again).