Thursday, October 1, 2009

Be Careful Out There....Dow 5-Day Chart

looks absolutely wild. For two days in a row, Dow Jones Industrial Average, along with S&P500 and Nasdaq, went down in an above-average volume. Back to back distribution days.

This doesn't feel like a healthy consolidation, which you call when the index goes down modestly on a subdued volume. This is a high-volume dump. The 5-day 15-minute chart of Dow below does look like a whip-saw action you would see near a market top.

People who follow Elliott Wave Theory are gleefully calling the start of P3, a big down-leg which will undercut the low of the initial P1 down-leg.

On a one-year weekly chart, Dow almost touched (but never did) the 89-MA and turned back. It could be the start of a temporary but sizeable pull back, like the one we had from mid June to mid July, or it could indeed be the start of P3.

The stock market crash of 2008 started in earnest on October 1st, 2008. Dow kept dropping for 8 trading days straight. Just the friendly reminder.

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