Charting the Weekly Dow Jones

Aug 12, 2008: 6:24 AM CST

While the Daily Dow Jones is short-term bullish, let’s step back and look at the larger structure for potential targets and zones of possible resistance.

Dow Jones Weekly:

We have a little leg-up in viewing Monday’s action on the chart, so the final candle is far from a complete weekly close, so keep that in mind.

Taking the Fibonacci retracement grid from the 2007 highs to the July 2008 lows, we see the 38.2% retracement target is at 12,115, while the 50% retracement target is 12,512.  Also, the 20 period EMA is just overhead, which could provide slight resistance at 11,950.  I’m not sure bulls will have much trouble overcoming this line at least initially.

Keep your eye on the 12,350 zone, which corresponds with the flattening 50 period EMA and is just beneath the 50% Fibonacci retracement – it would be difficult for bulls to advance beyond this level, and if they do so convincingly, it would be significant.

We see a new momentum low on the 3/10 MACD Oscillator (parameters 3, 10, 16), which often forewarns of potential continuation (in this case to the downside), and it is important to note that the overall trend is still clearly and officially confirmed as down (note the progression of lower lows and lower highs, as well as the ‘most bearish orientation’ for the moving averages possible).

Right now in the price structure, we are experiencing a ‘counterswing’ up, and will be classified as such unless price were to overtake the 13,000 level.  Bulls do not have excessive justification yet to be bullish long-term.  We take the price action and try to anticipate the next swing, which is currently up, but the larger trend is unchanged, which is evident on longer time frame charts.

Let’s continue to watch the situation as it develops and always monitor price for signs of continued strength, or potential developing weakness.

(Hat tip to Steve W. from the comment section on requesting a view of the weekly chart – his view, which also incorporates Fibonacci – can be viewed at his “State of the Dow” article).

1 Comment

One Response to “Charting the Weekly Dow Jones”

  1. SteveW (RecordPriceBreakout.com) Says:

    hey Corey, thanks for the NOD. Would you mind explaining the the use of the 16 week EMA as a signal line?

    Thanks,
    Steve