Monday, 23 June 2014

Will the Dow beat 17000? The top could already be in.

Will the Dow Jones Industrial Average beat 17000? Last week it hit a record high at 16978, and the futures pushed slightly higher again in today's Asian session. Charts in this post show the Dow futures up to the current European session, currently trading at 16930 or so, marginally down on last week's close.

Let's start with the big picture, a long term monthly chart, which shows a clear bearish megaphone pattern. The market is currently perched atop the upper trend line. Setting up for a false upside break and a peak for the megaphone? Once complete the megaphone sets up an eventual move to below the 2009 low.

Next the weekly chart zooms in to more clearly show recent market action relative to that upper trend line. Last week's low is absolutely key. Below that and the market has completed a false upside break, one of the most effective bearish edges.

Daily chart zooms in to show the bearish wedge formed since the low in early February. It could already have peaked though I'd be more confident that the top was in if the market showed a break through the lower trend line, or a false break through the upper line.

Finally I am showing the five minute chart. When the market peaks it will subsequently decline in five waves. There are clearly five waves down from today's high, so the top could be in. Of course, this is a chart for a very short time frame, so I don't read too much in to it with regard to the big picture. But sometimes, from little things, big things grow. Markets are fractal in nature. Given the precarious big picture position, any short term decline has an increased chance of growing in to an extended decline. As I stated above, last weeks low is key, but I thought I'd capture this five minute chart, just in case...