1. It sounds like an old worn out record, but optimists always ask the question: is the mar09 to jun09 rally (a) the first move up of a new uptrend? To be perfectly clear, let's state the obvious alternative: or is it (b) a correction of the existing downtrend?
For those impatient enough to demand a definitive answer "right here right now", then i'll have to say sorry, there's no way of knowing, for now. But for those patient enough to wait a little longer for price charts to develop, there are markers that technicians look for to clue them in to likely outcomes.
2. The Mar09 to Jun 09 2408 pts advance (6469-8877) represents a 92% retracement of the Dec08 to Mar09 downtrend of 2619pts (9088-6469). A retracement of this magnitude exceeding 70% shows that the momentum of the existing trend has weakened considerably and usually precedes a potential change in trend. A change in trend is (a) a reversal in direction of the current trend, or (b) a prolonged sideways movement.
3. By (a) registering a lower high on 6/19/09, and (b) breaking below the 6/17/09 support - thereby ensuring a new lower low - the index has commenced a fresh short term downtrend.
4. if we are looking for signs or clues to answer the question in (1) we can look to the following:
(a) if this new retreat finds strong support between the range of 7300 and 8000 then it becomes "possible" that the last advance is indeed the first upleg of a new downtrend. A subsequent upmove above 9000 with convincing volume will raise the soundness of the speculative new uptrend from "possible" to "likely".
(b) if the retreat finds significant support at or near the 6500 level, then it is likely that the index could be in for a consolidation. If this happens, We will have to look for future signals to clue us in on which direction the index will break.
(c) lastly, if this retreat eventually finds its way below the major support of 6500, then it will be safe to say that the downtrend continues to remain valid.
Somebody mentioned that "a market bottom is not an event, it is a process". It will be helpful to remember this to avoid getting ahead of ourselves.
For those impatient enough to demand a definitive answer "right here right now", then i'll have to say sorry, there's no way of knowing, for now. But for those patient enough to wait a little longer for price charts to develop, there are markers that technicians look for to clue them in to likely outcomes.
2. The Mar09 to Jun 09 2408 pts advance (6469-8877) represents a 92% retracement of the Dec08 to Mar09 downtrend of 2619pts (9088-6469). A retracement of this magnitude exceeding 70% shows that the momentum of the existing trend has weakened considerably and usually precedes a potential change in trend. A change in trend is (a) a reversal in direction of the current trend, or (b) a prolonged sideways movement.
3. By (a) registering a lower high on 6/19/09, and (b) breaking below the 6/17/09 support - thereby ensuring a new lower low - the index has commenced a fresh short term downtrend.
4. if we are looking for signs or clues to answer the question in (1) we can look to the following:
(a) if this new retreat finds strong support between the range of 7300 and 8000 then it becomes "possible" that the last advance is indeed the first upleg of a new downtrend. A subsequent upmove above 9000 with convincing volume will raise the soundness of the speculative new uptrend from "possible" to "likely".
(b) if the retreat finds significant support at or near the 6500 level, then it is likely that the index could be in for a consolidation. If this happens, We will have to look for future signals to clue us in on which direction the index will break.
(c) lastly, if this retreat eventually finds its way below the major support of 6500, then it will be safe to say that the downtrend continues to remain valid.
Somebody mentioned that "a market bottom is not an event, it is a process". It will be helpful to remember this to avoid getting ahead of ourselves.
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