Dow 14000 – I Remember You When

Jan 19, 2008: 5:04 PM CST

The Dow has fallen from a peak of above14,000 to a recent retest of 12,000. I remember those days!

It seemed like only yesterday that the market was full of fear, worries, anxieties, and talk of a possible recession, credit crunch, inflation, [insert worry here].

Yet, the market kept shrugging off this talk of nonsense and raced to new lifetime price highs, embarrassing all those who presented fundamental data or anecdotal data that the market was overvalued and should be much lower.

I remember those who said rate cuts by the Federal Reserve would bolster the economy and save the day. The market rallied hard on news (and realities) of cuts in the Federal Funds rate, but all those gains have evaporated.

In fact, all the gains of 2007 have now been erased. The good news is that the market seems poised to hold on to its gains from 2006 at Dow 10,750 (which is beneath the rising 200 period weekly moving average).

Let’s look at a weekly chart:

A broadening formation (which is a bearish major reversal formation) appears to be completing and breakout out as expected to the downside.

A “measured move” or bear-flag style pattern (not shown) has completed, and it would be very feasible to see a bounce (retracement) that could form a type of dead-cat bounce on the major indexes.

I first mentioned the Broadening Formation forming in a post on December 1st:

Broadening Formation Unfolds on Major US Indexes (Dec 1, 2006)

I further commented again on the formation in mid-December in a random post entitled Midweek Index Overview (Dec 16, 2006).

Either way, it appears that the market is in a downward direction, but I’m concerned that the downward correction is seen by everyone and we all know what happens when everyone sees the same thing in the market (answer: The market does the opposite of what everyone thinks).

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  1. Stock Market » Dow 14000 – I Remember You When Says:

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