Dow Daily Structure July 15th
I’ve tended to focus a lot of my analysis on the S&P 500, but let’s take a step back to look at the Dow Jones Index for possible clues and an interesting pattern that *could* be forming on the daily chart.
As much as I hesititate to believe it, there is a possibility that the Dow is forming an expanding triangle or broadening formation, with an upside target near 9,000 (which would be a retest of the January highs).
We still have a negative volume divergence and a negative triple-swing momentum divergence which the bulls are going to have to overcome, and I think it will be difficult to do, particularly given the “Summer Seasonality” (stocks tend to experience seasonal weakness in the summer months, or at least a flat, trading range as volatility/volume is expected to decrease).
I’m mainly posting this as a “Hmm. This is interesting” and basing it off the swing highs and lows and the trendlines that originate from the May highs and lows which seems a natural fit.
Without effort, price shattered overhead EMA confluence resistance thanks to Intel’s (INTC) earnings surprise and the market’s reaction to it.
Keep this as a possibility as we get more information.
Corey Rosenbloom, CMT
Afraid to Trade.com
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You might add that the 200ma on the Monthly is a show stopper too, not to mention the bear down channel:
http://i26.tinypic.com/2qkozec.png
Actually you see that pattern forming on SPX also. But that would require SPX to go above 1000! But in the end, mega-phone (widening wedge) is a bearish pattern which will result in a very fast drop. Also mega-phone pattern might accompany a blow off top also…
Aside from technical analysis… A rally, now? Think about this… It's the dead of summer, usually a stagnant period for the equity markets; California, the eighth largest economy in the world can't pay it's bills and is issuing IOU's; CITI Bank is on the brink of default on its debt and probably will file bankruptcy in the immediate term; Oil is still holding in the low $60's but, is predicted to tank, cause the tanks are brimming full… the US consumer just is not spending; The lack of spending is feeding back on the emerging markets where initial optimism is now beginning to appear less robust; And the US Federal Government has leveraged itself to the hilt… A rally, really?
Aside from technical analysis… A rally, now? Think about this… It's the dead of summer, usually a stagnant period for the equity markets; California, the eighth largest economy in the world can't pay it's bills and is issuing IOU's; CITI Bank is on the brink of default on its debt and probably will file bankruptcy in the immediate term; Oil is still holding in the low $60's but, is predicted to tank, cause the tanks are brimming full… the US consumer just is not spending; The lack of spending is feeding back on the emerging markets where initial optimism is now beginning to appear less robust; And the US Federal Government has leveraged itself to the hilt… A rally, really?
Take a look at the longer, bear market, downward trend line… Price is right now testing it a second go. Will it hold or fail? A break, with price holding above the trend line formally signals (Dow Theory) an end of the “bear market”. A failure signals the continuation of the “bear market”. Hmmm. An interesting moment in time.