Dow Jones Industrial Average --- where is it going

[Crabtownboy]

This morning, 11/24/08, the Dow opened at 8046. That is a reversal on the type of chart I use. What does it mean? Not much yet. There is no major resistance until it reaches 9250 ... but I do not expect it to go straight up to that point. I do expect it to work its way sideways, like a crab, until that resistance point is reached. By that time resistance will be below 9250. Until that resistance line is broken there will be no real signal that the Dow has reversed to an upward trend.

 

[KenH]

I figure it will take quite a while yet for the stock market to form a base.

 

[Crabtownboy]

I figure it will take quite a while yet for the stock market to form a base.

I believe you are correct. It will act like a crab and go sideways building a base. If it heads down, breaking the bullish resistance I am not sure how far to expect it to fall. More later on that if it happens.

 

[carpro]

Who knows?

Politicians said to pass the $ 700 billion bailout or we'll see a dow-jones at $7500.

They passed the bailout.

We saw a DJ at $7500.

Fear is a usefull tool for a government gone wild with tax dollars.

 

[Crabtownboy]

Who knows?

Politicians said to pass the $ 700 billion bailout or we'll see a dow-jones at $7500.

They passed the bailout.

We saw a DJ at $7500.

Fear is a usefull tool for a government gone wild with tax dollars.

I am not sure what you were trying to say. The type of chart I use, Point and Figure, indicated some time ago that the DOW would fall to about 7500. We now have had a rebound from that level, which I expected. However, there is not enough data yet to show if this is merely a temporary pause before heading on down, or if a bottom is to be formed before a sustained upward movement. There is minor resistance at 9300. It will be interesting to see if it reaches that point and see if it breaks through it, or bounces off and goes back down.

 

[Gold Dragon]

Just curious. What are you talking about when you say resistance? And is there something magical about the 9250 mark?

 

[carpro]

I am not sure what you were trying to say.

Give it some thought. Maybe you'll see the light.

 

[Crabtownboy]

Give it some thought. Maybe you'll see the light.

Why don't you try explaining ... if you know what you were saying.

 

[Crabtownboy]

Just curious. What are you talking about when you say resistance? And is there something magical about the 9250 mark?

On a point and figure chart you draw a 45 degree angle from the last high that was confirmed by a down move and then an up move that did not reach the previous high. I will try to do this graphically here. Major resistance currently is at 10,400.

High from where the 45 degree angle will be drawn.
X
X O
XOXO
XOXO
XOXO
XOXO
XOXO X
OXOX XO
O OXOXO
OXOXO
O OX
O



X's are the DOW going up, O's are down. This is just a sample graphic, not the current DOW.
This is the resistance line.

The major resistance line is from the very top, the highest point the DOW reached.

Currently the weaker resistance line is at 9250. If this is not broken, but the DOW reverses downward the resistance line will reste to 9200. Each box, or square is 50 points on the DOW. The DOW must reverse 3 boxes in the opposite direction for the column to change.

I hope this makes some sense. Point and figure is not the most popular form of charting, but I have found it very reliable for indicating where the DOW or a stock is going. You do not try to hit tops or bottoms when buying stock, but you try to get a nice slice out of the middle of a trend.

 

[Crabtownboy]

I still have not figured out how to insert an image. However, this link will take you to the point and figure chart of the DOW as of this morning, 11/25/08. The major resistance line is shown in red. The minor one is not shown. www.stockcharts.com is an excellent technical analysis web site.

 

[KenH]

I read two books on technical analysis about 20 years ago so I know a little bit about it. I am getting brushed back up on it by reading Technical Analysis for Dummies by Barbara Rockefeller. She has a chapter on point and figure charting.

 

[Crabtownboy]

I read two books on technical analysis about 20 years ago so I know a little bit about it. I am getting brushed back up on it by reading Technical Analysis for Dummies by Barbara Rockefeller. She has a chapter on point and figure charting.

Every stock acts differently. If you keep charts on a number of companies and update them daily you begin to get a feel for how a particular stock is going to act. It is strange and I have no way of objectively proving this, but I found it so.

I have used P&F charts for, oh, 30 years and have found them very good ... nothing is 100% of course. But remember cut your losses short and let your profits run. Get the good slice out of the middle of the trend.

Another way to get a nice slice out of a trend is to use moving averages. Your book should talk about them also.

 

[Crabtownboy]

The DOW Industrials climbed right up to the first minor resistance line at 8,750 and immediately retreated. Uncanny how these Point and Figure Charts are so accurate so often. The first resistanc on the down side is at 7550. It will be interesting to see if it breaks through and heads on down or continues to work its way sideways.

More later.

http://stockcharts.com/def/servlet/SC.pnf?c=$indu,P

 

[Crabtownboy]

OK, we had a reversal up and it did not reach any resistance before turning down. The sideways pyramid is getting toward the point, so something has to give soon. The first resistance down now is at 8200. If it reverses upward the first resistance is at 8550.

Still to soon to say there is a change in the major trend ... which is down.

http://stockcharts.com/def/servlet/SC.pnf?c=$indu,P