Dow to 16,000! (Thank Ben)

As the deranged central bankers running amok with $110 billion per month monetization (that's what it is, even though it is done through the primary dealers - who happen to own the Fed), the sky seems to be the limit for the stock market and the commodities market.

Buy anything, it will be good for you, says the bankers.

So, let's take a look at how high Dow Jones Industrial Average can go, TA-wise. I know, I know, what's TA in the age of permanent meddling by the Fed? Well, algos used at the NY Fed may be programmed to think and act like a human trader. Their time-span is in seconds for their "long-term" holdings, that's all..

This is 5-year monthly chart of Dow. See how it is fashioned like a cup and handle? A rather pointed cup but never mind that. The index is just breaking out of the handle high. From the pattern, the target price would be:

Depth of the cup + handle high. And that computes to: 16,046.


Sometime in 2012 maybe. Ben should do QE3, 4, 5, 6, 7... to make sure it gets there. But good luck when you have to answer Ron Paul in the Finance subcommittee, Ben. You can't laugh at him like you did before, because he will be the chairman of the subcommittee...

Again, this is not an investment advice. Just for your entertainment. Laugh and be merry. A cup of Starbucks coffee may cost you $20 soon, but your 401K will increase in price (until the government decides to seize it from you by stuffing special Treasury retirement bonds...) GLTA.

Is Long Bull Run Finally Ending in the US Stock Market?

Well, Shanghai does seem to be leading the way to the downside.

In the US, ever since the 'flash crash' of May 6 which was probably caused by High-Frequency bots but the SEC refuses to admit, things are not the same. Germany's panicky move yesterday to ban the naked shorting of select financial shares and euro bonds via CDS hasn't helped (what were they thinking?) calm the jitters in financial markets, to say the least.

I don't like what I see in Dow Jones Industrial, both in daily chart and weekly chart, and I suspect the long rally from March 09 may be finally over, for now.

First the 9-month daily chart.


The 'flash crash' went right through the supporting trendline from August 09, and the index has been unable to reach that trendline. It hit the line on May 12 and again on May 13, and it headed right back down.

You could argue it is the same setup as February correction, when the index went below the same trendline and failed in its first attempt to retake the line. But two things I don't like this time: 1. Down-volume is so much bigger; 2. Because of this February dip, we now seem to have an expanding wedge (dotted lines in the chart). I learned that an expanding wedge may mark a market top.

Next, the 3-year weekly chart. I like it even less.


The gigantic reverse head and shoulders pattern that marked the March 09 bottom and rapid recovery has pretty much played out, i.e. it seems to have hit the logical target, which is the head height added to the shoulder line. The index also has hit my target, which is 61.8% Fibonacci retracement line. It went slightly above it, and turned back hard on the 'flash crash'.

If the 'flash crash' was simply a technical glitch, the market should have roared back. It did, briefly, after the announcement of $1 trillion euro bailout plan, on a soft volume. Sure enough, it dipped right back. The index is now sitting on 50% retracement.

There are things called fundamentals and macroeconomics, financial policies and sovereign governments, and they have come back into the stock market big time. Even the algo bots seem skiddish.

That aside, look at the technical indicators on this weekly chart. RSI is breaking below 50 for the first time since July 2009. MACD is crossing down. Slow stochastics set at 60 for longer trend is about to break below 80 for the first time since March 2009, an indication that the current bull run may be finally over. Last time it broke below 80 was October 2008, a few weeks after the market top.

On the weekly chart, I don't see a solid support until 8,800 area. 9,400 area may offer some support (38.2% Fib retracement), as there was some consolidation around that area back in August-October 2009.

I'm particularly watching the Slow stochastics (60) on weekly chart.

Will Shanghai Lead the Way ... to the Downside?

Well. Calling S&P500 to 1300-something was such a wonderful timing, wasn't it? While it could still get there, the timing is anyone's guess at this point, with the European "nuclear" option to save euro lasted 12 hours.

In the meantime, I was reading an article at Bloomberg, which said "China is entering a bear market". WHAT?

Shanghai Composite Index lead the way to the upside; it bottomed in October 2009, nearly 6 months before the US stock market bottomed in March 2009.


To my surprise, I found out that Shanghai totally underperformed Dow. I don't regularly check Chinese indices, but all the news about China being the engine to pull the world out of the recession has given me the impression that the stock market there is booming as well. But no. Shanghai index retraced barely above 38.2% Fibonacci retracement, while Dow touched 61.8%. Shanghai was going sideways since August last year, forming a symmetrical triangle. But instead of breaking in the direction of the previous trend (which was up), it broke down. Technical indicators (Aroon, Slow stochastics, histogram) are all negative, and already flashed a sell signal.

Dow hasn't reached that stage yet, as you see. Technical indicators are still in a bullish territory, although the MACD histogram has been one big negative divergence ever since March 2009. However, with the last week's freefall thanks to algo bots and with "we will do whatever it takes" Europe, it feels like the floor has been yanked from under our feet. And what we saw that day under our feet was a void, a blackhole.

Those algo bots were busy all day Friday and all day today to prove (to the regulatory authorities) that they are worthy provider of liquidity, capable of supporting the market. I wonder if they were successful in convincing investors. The stock market doesn't feel like a pricing mechanism any more.

Where Is This Listless Market Going?

I can't make head or tail out of it. The best position still seems to be in cash, until we see more definite trend. I am being caught holding long positions (gold, silver, miners, oil) but I am sitting on them because my costs are low (except for oil).

I looked at the 3-year weekly chart of Dow that captures the market top in October 2007. As one of the indicators I put "volume by price" as background, and noticed a very interesting thing.



Take a look at the volume by price when the market started to tank in late September 2008. A tiny volume for such a big drop. The volume didn't reach a panic size until Dow hit between 8,000 and 8,500. Many investors didn't unload their holdings until Dow hit that interim bottom. Not only that. It looks there was more buying than selling as Dow rapidly descended. It's nearly 30% drop in the index, but many individual stocks fared far worse.

For those who didn't sell at the bottom of that drop, a sudden, accelerated decline in February 2009 must have been just too much. They dumped this time, probably, as soon as the index started to go down in earnest.

So, where are we at now? We are back to that very thin volume by price zone, between 10,350 (about 50% Fibonacci retracement) and 11,000. It may be easy for the index to go through this thin area, as there shouldn't be much resistance. Volume by price bar near 61.8% retracement, around 11,260, shows more selling volume than buying volume, so there may not be many sellers left if and when the index hits the area again.

My feeling is that Dow (and the US stock market) may still have an upside at least to 61.8% Fibonacci retracement area. But there are too many uncertainties in the market and the world outside the market that could easily torpedo TA and render it worthless. Greece, for example. S&P is saying Greece may be downgraded yet again, and the stock futures drop. Last I checked, Dow futures were down 58, S&P 500 futures down 7, Nasdaq futures down 12

But then again, miraculous clutch save may appear in the premarket tomorrow, and turn the indices around in a flash.

As I said, I can't make head or tail out of it, and I am annoyed that my gold holdings are being hammered down...

Scary Days Are Back Again? Or Not?

I can't decide. But ever since the Presidential temper tantrum in mid January, the market increasingly feels like it is a replay of February-March 2009, if not September-October 2008. It was downright scary sometimes, like the day Dow went down more than 200 points.

But I just want to point out one repeating pattern in the weekly charts of Dow and S&P 500. We will find out soon enough, whether the scary days are back again or not.

This is a Dow weekly chart from December 2009. The final plunge (for now) in February-March 2009 took 4 consecutive down-weeks. Then a sharp reversal took place. In June-July, 4 consecutive down-weeks happened again, again followed by a reversal that took the index higher without much of a correction (on a weekly basis) until January this year.

It is a log chart, so you can compare the magnitude of each correction. The correction this time is about the same percentage as the correction in June-July 2009.


I noticed this pattern in July last year, after the reversal happened. "Hmmm, it's fractal... the pattern repeated on a different scale..." Maybe I mentioned it in a post here, maybe not.

This week was the 4th down-week. Will the pattern repeat itself?

Today Dow went as low as 9835, only to reverse all of a sudden out of nowhere to end above 10,012. I was planning on buying gold and gold miners EOD, thinking this was a solid, no-recovery down-day.

According to Jim Cramer of CNBC's Mad Money, it was the job of one hedge fund, who wanted some action in a thin market. The fund used 100 to 1 leverage (I think that means either options or futures), according to Cramer.

That reversal was reminiscent of March 09 reversal, when out of nowhere buy orders flooded the market. Rumor at that time was J.P. Morgan, buying a large quantity of S&P futures that cascaded throughout the financial markets that were open at that time. Who could that hedge fund be this time?

If this is their game plan - 4 consecutive down-days in a volatile fashion so that retails are scared away (again), and pros (hedge funds, market makers, banks) will jack up the market higher on a thin volume. It would be easy to jack it up, precisely because the volume is thin.

In the chart, I put in a target number just in case this pattern repeats itself and the market miraculously reverses from next week on. The target is 12,664. I know it's ridiculous, but I'm just calculating, based on a simplistic assumption that the pattern may repeat.

Now let's laugh at it and be merry. Doesn't feel like it's going to happen, and analysts and pundits are predicting 20% correction from here. But then it felt like the market would never go up again back in March 2009.

Will Three Black Crows End the Rally?

What often kills a market rally is not financial in nature. It's political.

There lies the limit of TA (technical analysis), I think. Many TA enthusiasts say "It is all in the charts", but how could a chart predict, for example, the president's (seemingly) sudden declaration of war against "evil bankers", targeting proprietary trading and investment strategy? The news was leaked on Wednesday, with his press conference on Thursday, and was followed up by his townhall meeting speech (does he think he is still a candidate running for presidency?). For all these three days, the stock market in the U.S. tanked, taking the global markets along with it.

Obama's newly-found populist stance has cost the investors around the world billions of dollars in a very short time.

What comes to my mind, though, is a chatter on financial TV programs on Friday last week that Tuesday (Jan 19) would be a bloodbath. It seems, in retrospect, some traders had had some information beforehand. To the extend that these traders may have acted accordingly and thus altered the patterns of squiggles or candlesticks on the stock charts, then you could say "it's all in the chart". But that's nothing but traders trading on insider information.

Three heavy down days created an extremely bearish candlestick pattern called "Three Black Crows", which is best formed on Dow Jones Industrial Average daily. The daily chart also shows negative divergence that has been developing on RSI and CCI (at 133 for longer term trend). CCI dipped sharply below 100, almost for the first time since July 2009.

If the fourth day, Monday, is another down day, the likelihood of the market going even lower is high.

To me, the market has started to feel like a repeat of October 2008. Back then, the heavy sell-off was triggered by the passage of bank bailout bill (a political event). It was ironic, because up to that point the sales pitch for the bill to the masses had been "If we don't pass it, the market will tank, the credit will be frozen, it will be a disaster!" That disaster happened after the bill was passed.

The market was sold off for 7 trading days, shedding over 20%.

Back then, the first three trading days resulted in over 8% loss. This week, from Wednesday to Friday, the market lost 4.6%. The loss is milder this time, but September 2008 was not an uneventful month - Lehman Brothers' bankruptcy, Fannie and Freddie and AIG practically nationalized, run on the money market funds.

This is a Dow weekly chart with Fibonacci retracement lines between several tops and bottoms. Where it is at, Dow doesn't have much support until it comes down to 9,700 area. 10,000 is a support in a psychological sense, and if that breaks, it could go down very rapidly. More solid support is around 9,100, and that's July 2009 level. To be sure, negative divergence has been developing on technical indicators, as clearly seen in MACD Histogram.

For now, Dow futures are up 44 points.

Where We Stand in the Stock Market

Well, a near-impossible has happened in the past 10 months. Dow Jones Industrial Average went from March 09 low of 6,469 to today's close at 10,680, a 65% gain.

If you didn't believe in the rally in March and stayed out, you still had a chance in July to get in, as you can see in the 3-year weekly chart of Dow. That was really a last chance, as far as the index shows. But instead, many retail investors stayed out in fear, that July correction could be "it" and we were going down to test the March low. If you had dumped everything in DIA (ETF on Dow) in March, you would have gained 65%. If you had dumped everything in LVS (Las Vegas Sand), your gain would have been well over 1000%. What a game.

(If I had dumped what's left of the money in my account into MTL in March, the gain would have been 470%. Oh well.)

On the weekly chart RSI, there is no negative divergence yet. (On the daily Dow chart, RSI shows a negative divergence.) CCI set at 133 to see the macro movement is still below 100, a bull market territory. Slow stochastic set at 60 shows it has broken into a bull market territory in November 09.

Dow now poked above the 50% Fibonacci retracement line from the market top in October 07, and may be starting to climb further up the thin zone up to 61.8% retracement. There will be a resistance there.

Many retail traders/investors are actually angry that the market has ramped up (or has been made to ramp up) like this. All the bad economic news, mismanagement and deficit spending by the government, job loss, coldest winter in years, and the stock market keeps going up. I do not believe that the stock market is "forward-looking", as pumpers at CNBC would say. I think it is reactive, and it is not enough to simply look at the chart to figure out what is more likely to happen. (And that's why I have the other blog on macro issues.)

For now, the chart seems to say there is still room for upside, at least to the 61.8% line around 11,245. The Point & Figure chart shows the target at 12,050.

I am not going to call the top. The more-or-less normal stock market ceased to exist in September 2009, and that much is very clear if you look at the chart. Since that shock was so great and violent, all we have had may be nothing more than a big DCB (dead cat bounce).

Batten Down the Hatches, Probably...

Thank you Dubai for the Thanksgiving surprise!

This is one of those events that defy technical analysis. You can't predict the event like this by looking at the chart. Asian markets are having a second day of severe down draught, with Hang Seng and Seol Composit leading the way. European bourses are sure to follow, which will be followed by the U.S. market. Dow futures are down 250 points as of 00:16 AM EST. I don't remember seeing the Dow futures this much in deep negative territory even in September/October of 2008.

The chart below is a 2-year Dow weekly chart, just to show the Fibonacci retracement from the March bottom to November top to see how low the index could fall. 61.8% line seems to offer a solid support, which is around 8,960. Back to the level in July. In between, 10,000 and 9,500 have some support, as they were resistance on the way up.



One of many things I regret for not having paid attention is Dubai's world-tallest skyscraper. When that building (still under construction) became the tallest in the world, it was September 1st, 2008. Right before everything went to hell in the stock markets worldwide. I had read about the "skyscraper index" back in January 2008, but I didn't connect.

It would be ironic if another Dubai incident (this time a threat of sovereign default) marks the beginning of a significant leg down in the market, which Elliott Wave people call P3, last leg of a bear market which will undercut the first leg low.

Nikkei and Dow, Since 1984

Japan's Nikkei must be the saddest stock index in the world. At least so it seems to me.

Nikkei is again (third time) lower than the level in 1984, and that's 25 years ago. "A lost decade"? Here we may be potentially talking about "lost three decades", and possibly hoping that it will stop at "three decades".

Beaver Moon Did It Again...

The U.S. stock market bounced on the full moon (Beaver Moon), yet again. Just when I started uneasy holding long positions after seeing high-volume selloffs (that clearly signal distribution - pros are getting out).

This moon cycle pattern was first mentioned back in September by one of the members (a very strange one, too) on the Yahoo SKF message board. I laughed, but I didn't sell out, partly because of his insistent comments. Another bounce occurred on October's full moon. And another on November's full moon, which has now sent Dow to 2009 high. This latest full moon, I learned, was considered the most powerful full moon in 100 years, according to this Indian guru. (The link was given to me by my primary physician.)


This is a daily Dow chart, marked with green arrows for full moons, and red arrows for new moons.

Please don't trade on the moon cycle unless you do your own DD (I don't know how you do DD on moon cycle but...) and are convinced of it. I am definitely not recommending anything here. It's lunatic, literally. And MACD and RSI both show negative divergence, although slow stochastics (60,3) is nicely above 80 again.

Negative divergence on a short-term daily chart usually indicate a correction is imminent, and I thought we would get that correction today. All we got was S&P500 down 0.07 points and Nasdaq down 2.98 points. Instead of selling off, Dow managed to go positive. What do I know? (Can't win against Goldman Sachs, who's doing "the God's work", can we?)

Is the Rally from March Finally Over?

For the first time since I went long back in March, I am shopping for short ETFs.

The major indices dumped big time today, after a tepid attempt to reverse the trend yesterday. Since last Friday, Dow has lost 347 points, or 3.4%, S&P 500 lost 54 points or 4.9%, and Nasdaq lost 131 points or 6%.

September had a similar mini-crash that brought the indices to their 50-DMA. June was worse, to be sure, and the indices dipped below 50-DMA and 200-DMA (crossover was happening then, so it didn't take much to go below 200-DMA).

What I don't like about it this time is the behavior at the top, from October 19 to 23. The daily movement was loose and wide. 100 point reversals, big down day followed by big up day. What does that remind me of? The market top in October-November 2007, and September 2008 right before the crash.

This is a 7-month daily chart of Dow. Negative divergence between RSI, price, and money flow are more prominent and consistent. It decidedly broke the trend line from March low today, and can go down to the trend line from August. That trend line forms a rising, expanding wedge, which is bearish and indicating the topping action. Using the slow stochastics with (5,3) for short-term trend, the index is short-term oversold, which is about the only good thing about the chart for market bulls.


Goldman Sachs lowered their estimate on the 3rd quarter GDP today, one day before the announcement. Market reaction to economic/financial news (ever since the new moon, come to think about it) has been negative: good news is perceived as not good enough, and bad news is perceived as worse. If this trend continues, the reaction to GDP number may be negative, no matter what the actual number will be. If that happens, it may finally be the "batten down the hatches" time, and time to make money on the short side.

Still, stochastics is short-term oversold, and the put/call ratio (a contra-indicator) has spiked up to 1.11. A bounce may happen soon. Another contra-indicator is that too many traders and pundits are now very bearish, calling the top for the year (even Jim Cramer).

Well, the proverbial broken clock is right twice a day...

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.

Does It Exist In Nature? - Dow Intraday Chart

You can argue that since it happens in this world, of course it exists in nature.

But watching it intraday, it sure didn't look anything natural that you see in the stock market movement.

It's more like part of desert plateau in Utah... OK so it does exist in nature.

Dow 5-day Chart: Ascending Triangle?

It looks to me like "ascending triangle" formation over the two days. Usually the break is to the upside, but since today is a quad-witching day I don't think it will happen. But who knows? It's Mercury Retrograde, after all...



(If a breakout ever occurs out of this pattern (if this is an ascending triangle pattern, that is, LOL), the target for Dow is about 100 points up from here, bringing the index very close to 10,000. DISCLAIMER: I am not not qualified to advise, recommend on the stock market, and this is only for your and my entertainment.)

EOD (end of day), the crooks otherwise known as market makers and specialists, managed to end Dow Jones Industrial Average right on the dot on the lower ascending trendline. The ascending triangle formation is still intact, which may or may not be significant, as this was a quad-witching Op-Ex (option expiration) day.

Dow Jones Industrial September 16, 2009

It's about time I revisit the chart of Dow Jones Industrial Average. Why today? Because it's been over a month, and the index was up on a larger volume, and because my once-dessimated portfolio recovered to what it was right before the September-October crash of 2008.

In my August 3 post, I bragged "I Told You So in May, and Sucker's Rally Continues!". I'm not bragging again, but just wanted to mention what I got right almost for the first time since I started actively trading, almost exactly two years ago (right before the market top...). That's about psychology.

"To be really a "sucker's rally", the rally has to threaten to fill the huge gap down created in October 08", I wrote back in May. Whatever the underlying reason or un reason, the market has climbed just like I thought it might, handily beat my first target of 9,300 - 9,400. Right now, Dow is between the 32.8% retracement and 50% retracement from the October 07 market top.

In this Dow 3-year weekly chart, 50% retracement would take the index to about 10,300. That's the middle of the sheer cliff from October 08 crash; very thin resistance (remember those days when Dow dropped 200, 300, 500, 700 points in one day?). I wouldn't be surprised it runs up to 61.2% retracement, which would be around 11,200.

RSI is in uptrending channel, MACD is solidly positive, and slow stochastic is above 50 for the first time since the 2007 market top. It could collapse back so quickly if a next financial disaster hit, but for now they are all good signs, no negative divergence. Only negative divergence I see in the chart is the volume. It's been decreasing ever since the March 09 bottom while the index marches upward ("Rally that no one believes in"). However, the trend may change, as proverbial "performance anxiety" among professional traders, fund managers, and retail investors may intensify.

Rally Nobody Believes In Marches On

Just about every trader whose comment I read and hear wants to short the market or is already short. Then the market does what it does these days, which is to go up.

Quant/algo trading notwithstanding, today's intraday charts of all the major indices - Dow, S&P500, Nasdaq - registered a vertical spike all at the same time, at 2:27 PM EST. S&P Futures spiked at the same time. So far, there is no news that could have triggered it.

Certain patterns does not exist in nature, and this sure looks unnatural. You could possibly argue that the 30 minutes or so before the spike, the indices were sitting flat, getting ready for a pop.

Industrials and utilities supposed to pull the indices higher today. One of my watch list stocks, NOV, had a large volume up-day, ending the day above the overhead resistance of $40-41. I put in a partial order, which didn't fill. Might as well see if it can hold above today's close before I commit.

Uncanny Resemblance: Dow Intraday vs One-Year Daily

It's possible I'm imagining things. Probable, even. But I just wanted to quickly share. The top chart is Dow Jones Industrial Average intraday for today (August 28, 2009). The bottom is also Dow, 11-month daily.

Fractal nature of patterns, or my hallucination, LOL.

Dow July-October 2007, Augmented, Fractal

Dow charts again today, as I noticed a curious thing. I was looking at the Dow Jones Industrial Average 3-year daily chart that covered the period during which the index ran to the top in October 2007. It suddenly occurred to me that what we've been experiencing since October 2008 is basically the repeat of July - October 2007, except it's taking much longer this time and on a much bigger scale.

To show you what I mean, take a look at these charts. The top chart is Dow daily chart from July 17 to October 15, 2007. The bottom chart is Dow weekly chart from the week of September 22, 2008 up to now. The top chart, daily. The bottom chart, weekly. Don't they look very similar?


The blog post's title, "Augmented", refers to a musical term. In music and music theory, "augmentation" is lengthening and/or widening of rhythms, melodies, and intervals. The same construction of the passage but the time is extended and the content (rhythm, melodies, etc) exaggerated. "Fractal" refers to a mathematical term. A fractal is generally "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole (wikipedia.org).

If what I'm seeing is an augmented market and the original was that of July-October 2007, then the top of the current run will be somewhere very close to the beginning of the swoon, which will bring Dow to about 11,240 - and that's where 61.8% Fibonacci retracement from the October 07 top to March 09 bottom sits, like I showed in yesterday's post. From the looks of them, we may have another 3 to 4 months till the market "tops" again, if I count the top chart's days as weeks in the bottom chart.

Mind you, I'm not saying that's what's going to happen. That's really a long way up. But I'm just fascinated that despite the market manipulations and all that high-frequency computer trading that wouldn't give @#$% to the mother nature, the index chart still manages to show what makes up the world - nature repeats the pattern in different sizes and time frequencies.

I Told You So in May, and Sucker's Rally Continues!

Sorry about bragging. I don't get to do it often. Back in May I wrote this post:

Case for Sucker's Rally to Continue (5/17/09)

In it, I wrote:

"To be really a "sucker's rally", the rally has to threaten to fill the huge gap down created in October 08. Right now, it is nowhere near it. The good place on the chart to achieve that goal seems to be 38.2% retracement from the bottom on Blue Fib, which pretty much coincides with 61.8% retracement from the bottom on Green Fib. That's about 9300-9400. At least Dow should go above 9000 to really sucker in the retail investors."

Well, surprise! It's happening. The huge gap from October 08 have started to get filled. So I decided to revisit the Dow Jones Industrial Average weekly chart.

I continue to like what I see, except the volume. RSI indeed threatened to backtest the downward trendline since 2007, but only a remote threat. MACD is finally over 0, and long-term extra slow stochastics (set at 60, 3) is going toward 50. I still believe this is a technical, bear market rally, but the stochs may overshoot and stay above 50. What I particularly like is the crossover happening between 13-EMA and 34-EMA. It hasn't happened since the downward crossover happened in December 2007. As 13-EMA is about to go above 34-EMA, both EMAs are turning UPWARD, which I think is very bullish.

My first target, 50% Fibonacci retracement from Oct 08 high to March 09 low (around 8800) is now met. My second target is the same I stated in May - between 9000 and 9500. Particularly around 9400, where 61.8% Fibonacci retracement from Oct 08 high to March 09 low almost coincides with 38.2% retracement from Oct 07 market top to March 09 low.

If it should ever clear that level, Dow could go on to actually fill the Oct 08 gap, which would be about 61.8% Fib retracement from the market top to bottom. That would bring Dow to 11240, 20% increase from here. Nasdaq is already climbing the gap wall half-way. Time-wise, I'm thinking October as a potential top.

(This run actually feels like the similar run back from March 2007, which topped in October.)

I'm still holding what I held in May, except FAZ which I sold what remained of it @4.90 (pre-reverse split) and bought NRO up to the equal $ amount. NRO is up 15% since, while FAZ is down 35%. Green shoot indeed, when a stock that invests in commercial real estate jumps in price like this. Overall, my portfolio is about the same level as May, as my portfolio is commodity/resource heavy and those stocks just got back to the May high level. Oh well. That shows I'm a lousy trader, but at least I didn't sell at the recent bottom.

Dow's Target (Barring Disaster, That Is)

Today, Dow Jones Industrial Average went past 9,000 for the first time since January this year and stayed above despite a modest selloff EOD.

This is a 2.5-year daily chart of Dow Jones Industrial. I am cautiously optimistic that the rally may continue for a short while. "Cautiously", because I do see some mixed messages. First, the volume continues to be unimpressive. Second, MACD does show a negative divergence. But I think what's significant here is RSI. For the very first time since June 2007, it poked through 70. Not even the market top in October 07 didn't see RSI go over 70 (that was a negative divergence, signaling the imminent downturn). Also, ever so slightly (so slight that it could be my imagination) the 200-day moving average seems to be finally flattening out, making the crossover of 50-day MA and 200-day MA more valid.



Provided no new disaster (financial, economic, political, what have you) strikes in the next several weeks, how far could Dow go? For that, I turn to Fibonacci retracements for a change. There are two sets of Fib lines on the chart. The yellow lines are from Oct 07 market top to March 09 bottom. The green lines are from Sept 08 to March 09 bottom. 38.2% retracement from bottom for the yellow line and 61.8% retracement from bottom for the green line seem to almost coincide. That seems like a logical target, around 9,450.

If it ever gets that far, I think it may overshoot and go even higher, perhaps to 50% retracement on the yellow line. That would be 10,334.

One disaster that I could see coming sooner is Treasuries. The yields on 5-year note, 10-year note and 30-year bond all jumped significantly today. The government will be selling over $200 billion worth of Treasuries including notes and TIPS next week. The U.S. dollar is barely hanging on to the dear life just below the long-term support line of 80 (see previous post). It just doesn't seem possible to support all of them, Treasuries, US dollar, and the stock market. Something gotta give, soon.