Interesting Convergence to Watch at 10,500 on Dow Jones

Nov 24, 2009: 3:58 PM CST

There’s an interesting convergence of two ‘advanced’ technical trading methods that show potential overhead resistance – or upcoming technical breakthrough – at the 10,500 on the Dow Jones Index – the upper trendline from an Andrew’s Pitchfork and the 100% Fibonacci Price Projection.  Let’s see them both.


(Click for Full-Size Image)

Without getting too deep in the lines, I’m showing the Andrews Pitchfork tool starting with the November 2008 low, then to the January 2009 high, and finally drawn to the March 2009 lows.

What you see is the standard “Pitchfork” tool with the addition of the Fibonacci Ratios of 38.2% and 61.8%.  I also included the 75% line (showing a recent bounce off its support in November).

The main idea is that the 100% line – projected from the January high – comes in near 10,500 and is currently appearing to serve as resistance.  Interesting.

Finally, I’m showing the same Fibonacci Price Projection line I mentioned in the prior post:

Fibonacci Price Projection Targets for the S&P 500 and Dow Jones

I’m using a more precise method in the above chart.  The 100% Projection – as shown with the light blue “flag” pattern – comes in just shy of 10,500.  Often these areas are expected to hold as resistance.

For more information, see my educational section article:

How Do We Find Fibonacci Price Projections?

As a reference, you can view prior updates with more explanation on the Andrews Pitchfork tool via the following ‘update’ posts:

November 5th S&P 500 Update

October 19th Andrews Pitchfork Update

July 28th Andrews Pitchfork Update

What’s the implication here?

These two ‘advanced’ methods are showing targets that are being achieved at the 10,500 level… thus some buyers are likely to take profits at these levels and aggressive short-sellers are likely to put on new short sale positions here, in anticipation of a downswing ahead.

If buyers/bulls can overcome this selling pressure, then we should see a spike move higher as these short-sellers cover their shorts (buy to cover) above 10,500.

Either way, it’s going to be an interesting inflection point to watch to see how much strength buyers have to continue pushing prices up.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

12 Comments

12 Responses to “Interesting Convergence to Watch at 10,500 on Dow Jones”

  1. pipercolt Says:

    Well you along with mr. prechter could be right.

  2. Corey Rosenbloom, CMT Says:

    I'm not looking for a free-fall in the market, I'm just on guard for a natural pullback.

    It is interesting that these two levels converge at the same price – and a break above these levels should trigger stop-losses of the sellers as that would be the unexpected outcome.

  3. graspthemarket Says:

    Corey,

    This is a very interesting intersection with all of those trendlines. Also, note that we traded at this level for more than two year in 2004, 2005, and the beginning of 2006. This could also contribute to the reason why the market is “pausing” here. Thanks for the chart and the interesting perspective.

  4. Lar Says:

    Have you ever considered looking at the NYSE P&F chart for $TICK NYSE, Interesting.

  5. Dan de Man Says:

    “If buyers/bulls can overcome this selling pressure, then we should see a spike move higher as these short-sellers cover their shorts (buy to cover) above 10,500.”

    Maybe this will happen on Monday when all the big boys come back from vacation.

  6. marketcalls Says:

    Hi Corey,
    As usual nice post with Andrew Pitchfork, Could you have a
    review with the GANN FAN indicator as it is poiting towards
    11200 and possibility of testing those levels on or before
    04, Dec 2009 as GANN Key reversal date come to 05 Dec 2009.

  7. Gann Fan Chart Art of Dow Jones Nov 25 | Afraid to Trade.com Blog Says:

    […] like my prior ‘advanced methods’ chart on the “Confluence at the 10,500 level in the Dow Jones,” let’s see how price reacts to these grids that most traders aren’t keeping […]

  8. Dan de Man Says:

    “If buyers/bulls can overcome this selling pressure, then we should see a spike move higher as these short-sellers cover their shorts (buy to cover) above 10,500.”

    Maybe this will happen on Monday when all the big boys come back from vacation.

  9. marketcalls Says:

    Hi Corey,
    As usual nice post with Andrew Pitchfork, Could you have a
    review with the GANN FAN indicator as it is poiting towards
    11200 and possibility of testing those levels on or before
    04, Dec 2009 as GANN Key reversal date come to 05 Dec 2009.

  10. Gann Fan Chart Art of Dow Jones Nov 25 | Penny Stock Trading System Blog Says:

    […] like my prior ‘advanced methods’ chart on the “Confluence at the 10,500 level in the Dow Jones,” let’s see how price reacts to these grids that most traders aren’t keeping […]

  11. Critical Weekly Reference Levels to Watch in SP500 NASDAQ and Dow Jones | Afraid to Trade.com Blog Says:

    […] my prior post: “Interesting Confluence to Watch at 10,500 on the Dow Jones” for more insight into why this level would be critical to watch and significant if broken to […]

  12. Critical Weekly Reference Levels to Watch in SP500 NASDAQ and Dow Jones | Penny Stock Trading System Blog Says:

    […] my prior post: “Interesting Confluence to Watch at 10,500 on the Dow Jones” for more insight into why this level would be critical to watch and significant if broken to […]