Interesting Dow Chart
Posted: Mon Jan 07, 2008 6:07 pm
After the drop in the stock market last Friday, I checked the Dow Jones Average chart for the last six months, and this is what it looks like.
http://money.cnn.com/quote/chart/chart. ... t1=Refresh
If you know anything about technical analysis, you'll note that the lows in August and in November appear to form a double bottom. This seems to be more the case with the closing numbers than in the trading range. However, the double bottom formation seems fairly distinct. And, of course, the trading range last Friday reached the closing figures from the two previous low sessions, in those two months of last year.
In terms of technical analysis, this is interesting, because it appears that the trading session on Monday is likely either to continue the downward trend, or to reverse (which is sometimes consistent with a previous double bottom) and start a new ascending trend.
You can bet that a lot of analysts and traders have spent long hours over this weekend, looking at this chart and trying to figure out which way it will go. Ordinarily, after a big drop like the one on Friday, the shorts would ordinarily be covering from the beginning of the session, to secure their profits, and the market would be up on Monday. But there was some bad economic news last Friday, and some of the political developments of last week still have to be digested. The shorts might wait a while before covering, because, when a market drops below a double bottom, it can go down like a rock until another support level is reached. If the market starts to slide by around nine in the morning, Pacific time, on Monday, it could get ugly. Of course, if the bounce back upward comes, that would look like a triple bottom, which is a rare formation, but which is usually thought to signal that the maket will not go below the level where the triple bottom is reached.
Of course, an index chart like this is, in theory, not as significant, in terms of formations like double bottoms, as is the chart of an individual stock or of an industry group. However, simply because the Dow is publicized, the chart formations that the Industrial Average forms, become important in affecting investor sentiment, for that reason.
I wouldn't advise anybody to sell the stocks he owns because of any movements on Monday, but it would seem to be prudent, for an investor to be cautious about buying or shorting, until a trend line becomes clear.
The next three months are usually not particularly bad for stocks, because it is the season when people buy stocks for their IRAs. However, if a clear downtrend develops, there may be few stock purchases for that reason, and it would perhaps not be a good indication for the market the rest of the year. No idea whether something like an Obama win in November, if he gets the nomination, would start a rally or a selloff.
http://money.cnn.com/quote/chart/chart. ... t1=Refresh
If you know anything about technical analysis, you'll note that the lows in August and in November appear to form a double bottom. This seems to be more the case with the closing numbers than in the trading range. However, the double bottom formation seems fairly distinct. And, of course, the trading range last Friday reached the closing figures from the two previous low sessions, in those two months of last year.
In terms of technical analysis, this is interesting, because it appears that the trading session on Monday is likely either to continue the downward trend, or to reverse (which is sometimes consistent with a previous double bottom) and start a new ascending trend.
You can bet that a lot of analysts and traders have spent long hours over this weekend, looking at this chart and trying to figure out which way it will go. Ordinarily, after a big drop like the one on Friday, the shorts would ordinarily be covering from the beginning of the session, to secure their profits, and the market would be up on Monday. But there was some bad economic news last Friday, and some of the political developments of last week still have to be digested. The shorts might wait a while before covering, because, when a market drops below a double bottom, it can go down like a rock until another support level is reached. If the market starts to slide by around nine in the morning, Pacific time, on Monday, it could get ugly. Of course, if the bounce back upward comes, that would look like a triple bottom, which is a rare formation, but which is usually thought to signal that the maket will not go below the level where the triple bottom is reached.
Of course, an index chart like this is, in theory, not as significant, in terms of formations like double bottoms, as is the chart of an individual stock or of an industry group. However, simply because the Dow is publicized, the chart formations that the Industrial Average forms, become important in affecting investor sentiment, for that reason.
I wouldn't advise anybody to sell the stocks he owns because of any movements on Monday, but it would seem to be prudent, for an investor to be cautious about buying or shorting, until a trend line becomes clear.
The next three months are usually not particularly bad for stocks, because it is the season when people buy stocks for their IRAs. However, if a clear downtrend develops, there may be few stock purchases for that reason, and it would perhaps not be a good indication for the market the rest of the year. No idea whether something like an Obama win in November, if he gets the nomination, would start a rally or a selloff.