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Monday, July 05, 2010 4:34:53 PM
Amateur Investors Weekend Market Analysis (7/3/10)
http://www.amateur-investor.net/Weekend_Market_Analysis_July_3_10.htm
Currently the Dow is exhibiting a bearish Head and Shoulders Top pattern as it broke below its Neckline support area this week. The next support area would be around 9429 (blue line) which is the 38.2% Retrace calculated from the March 2009 low to the April 2010 high.
Keep in mind some are forecasting the end of the world in the coming years with predictions that the market is eventually going to drop back to levels seen in the 1970's. However if we take a look at longer term trend lines and Retracement Levels for the Dow there appears to be a significant longer term support area near 6000. First notice the 61.8% Retracement Level from the late 1974 low to the April 2010 high resides just below the 6000 level at 5775 (red line). Secondly notice the the downward trend line connecting the 2002 and 2009 lows (blue line) would eventually come into play around 6000 as well.
Meanwhile the entire pattern from the late 2007 high could be developing into a larger ABC type correction. Wave A went from 14200 to 6470 while Wave B peaked at 11258 in April. Meanwhile the recent drop from would be the early stages of Wave C which could turn into an elongated affair with a possible target in the 6000 to 5775 range as talked about above.
This pattern would fit in nicely with the 10 Market Rules as described by Bob Farrell especially Rule #8.
1. Markets tend to return to the mean over time
2. Excesses in one direction will lead to an opposite excess in the other direction
3. There are no new eras — excesses are never permanent
4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
5. The public buys the most at the top and the least at the bottom
6. Fear and greed are stronger than long-term resolve
7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip
names
8. Bear markets have three stages — sharp down (A), reflexive rebound (B) and a drawn-out fundamental
downtrend (C).
9. When all the experts and forecasts agree — something else is going to happen
10. Bull markets are more fun than bear markets.
http://www.amateur-investor.net/Weekend_Market_Analysis_July_3_10.htm
Currently the Dow is exhibiting a bearish Head and Shoulders Top pattern as it broke below its Neckline support area this week. The next support area would be around 9429 (blue line) which is the 38.2% Retrace calculated from the March 2009 low to the April 2010 high.
Keep in mind some are forecasting the end of the world in the coming years with predictions that the market is eventually going to drop back to levels seen in the 1970's. However if we take a look at longer term trend lines and Retracement Levels for the Dow there appears to be a significant longer term support area near 6000. First notice the 61.8% Retracement Level from the late 1974 low to the April 2010 high resides just below the 6000 level at 5775 (red line). Secondly notice the the downward trend line connecting the 2002 and 2009 lows (blue line) would eventually come into play around 6000 as well.
Meanwhile the entire pattern from the late 2007 high could be developing into a larger ABC type correction. Wave A went from 14200 to 6470 while Wave B peaked at 11258 in April. Meanwhile the recent drop from would be the early stages of Wave C which could turn into an elongated affair with a possible target in the 6000 to 5775 range as talked about above.
This pattern would fit in nicely with the 10 Market Rules as described by Bob Farrell especially Rule #8.
1. Markets tend to return to the mean over time
2. Excesses in one direction will lead to an opposite excess in the other direction
3. There are no new eras — excesses are never permanent
4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
5. The public buys the most at the top and the least at the bottom
6. Fear and greed are stronger than long-term resolve
7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip
names
8. Bear markets have three stages — sharp down (A), reflexive rebound (B) and a drawn-out fundamental
downtrend (C).
9. When all the experts and forecasts agree — something else is going to happen
10. Bull markets are more fun than bear markets.
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