I have talked about the Dow Jones Index going to 6000 for quite some time. From the first time we tried to break down to this level we saw a rally, but that rally was stifled on multiple attempts to break above 9000 with any conviction. The market again broke lower and has now failed on two small rallies to break above 8400.
Friday saw the Dow break below the November lows signaling the market is still very wary of current economic conditions. The target for this breakout is 6000 (this is calculated by taking the range 9000-7500=1500, minus the breakout point which is 7500-1500=6000). This target is medium term target and could take place over a couple of weeks or several months.
In this market environment a V-bottom is unlikely. A V-bottom is where prices drop rapidly and then recover very quickly. Based on the charts it may be difficult for the markets to see a quick recovery because there is simply so much resistance. In other words, expect the market to remain in the 6000-8500 range for quite some time. Trades if made should be kept short term. Long-term investing is not yet required until we see some sort of definitive move higher.
There is some upside resistance at 8000, but more significant resistance to a move higher will be seen at 8400, 9100, 9600, 9800, 10 000. A move above 9100 in current conditions is unlikely.
Do We Have Confirmation?
The break below previous lows has not been confirmed as of yet by the S&P 500. If the Dow Jones Index is in fact due for another leg lower to 6000, the S&P 500 will also experience another leg lower. If the S&P does not break its Nov. lows of 750 it would signal a divergence and that the Dow breakout is false. Currently the S&P sits at 770.
Market Confidence
The market is unlikely to make any sustained move higher until confidence is restored in the markets. This could take some time. During times such as these people tend to horde their money which causes further lack of confidence because private investments and spending fall creating a further decline in jobs. This creates less tax revenue and means that governments need to dip further into coffers which are empty to begin with. Digging into money that was not there in the first place is what got us into this mess in the first place.
The market needs to stabilize naturally. Government expenditures and bailouts are not likely to work as it is equivalent to trying to push a wet noodle – it simply crumples. The current problems are built on long term cheap money and a separation from conservative investment ideologies. Investors, business and government has become to focused on short term gains (leave this to day traders – but governments, business and investors are not day traders and should not be acting as such) and now the financial markets are paying the price. Of course this last part is just an opinion and my view of the situation.
Tags: analysis, breakout, chart patterns, djia, dow jones, investing, investors, market analysis, market commentary, market summary, markets, online trading, resistance, s&p 500, Stock Market Analysis, stocks, support, technical analysis
DOW 6000?
I have talked about the Dow Jones Index going to 6000 for quite some time. From the first time we tried to break down to this level we saw a rally, but that rally was stifled on multiple attempts to break above 9000 with any conviction. The market again broke lower and has now failed on two small rallies to break above 8400.
Friday saw the Dow break below the November lows signaling the market is still very wary of current economic conditions. The target for this breakout is 6000 (this is calculated by taking the range 9000-7500=1500, minus the breakout point which is 7500-1500=6000). This target is medium term target and could take place over a couple of weeks or several months.
In this market environment a V-bottom is unlikely. A V-bottom is where prices drop rapidly and then recover very quickly. Based on the charts it may be difficult for the markets to see a quick recovery because there is simply so much resistance. In other words, expect the market to remain in the 6000-8500 range for quite some time. Trades if made should be kept short term. Long-term investing is not yet required until we see some sort of definitive move higher.
There is some upside resistance at 8000, but more significant resistance to a move higher will be seen at 8400, 9100, 9600, 9800, 10 000. A move above 9100 in current conditions is unlikely.
Do We Have Confirmation?
The break below previous lows has not been confirmed as of yet by the S&P 500. If the Dow Jones Index is in fact due for another leg lower to 6000, the S&P 500 will also experience another leg lower. If the S&P does not break its Nov. lows of 750 it would signal a divergence and that the Dow breakout is false. Currently the S&P sits at 770.
Market Confidence
The market is unlikely to make any sustained move higher until confidence is restored in the markets. This could take some time. During times such as these people tend to horde their money which causes further lack of confidence because private investments and spending fall creating a further decline in jobs. This creates less tax revenue and means that governments need to dip further into coffers which are empty to begin with. Digging into money that was not there in the first place is what got us into this mess in the first place.
The market needs to stabilize naturally. Government expenditures and bailouts are not likely to work as it is equivalent to trying to push a wet noodle – it simply crumples. The current problems are built on long term cheap money and a separation from conservative investment ideologies. Investors, business and government has become to focused on short term gains (leave this to day traders – but governments, business and investors are not day traders and should not be acting as such) and now the financial markets are paying the price. Of course this last part is just an opinion and my view of the situation.