DJIA 8/21/09

In my last post (DJIA 7/7/09), I said that "To increase the likelihood that this is the first move up of a major reversal ... then this current retreat that commenced after the 8877 peak in early jun09 needs to find support somewhere between the 8000 and 7400 range." Well the market did find support thereabouts and then advanced around 1500pts which I think deserves a fresh look at the charts.

PRICE TRENDS: price continues its 5mo uptrend (A) and is currently extending its 2nd upleg (c) that started early jul09.

MACD: positive with a higher low (D) that coincides with the recent price support level established in early jul09

MOVING AVERAGES: since jul09, the shorter averages have begun to dominate above the longer ones

CYCLES: the recent 4mo cycle (E) ends with a higher low and shows a right translation - typical during an uptrend. Note that all of the prev 3 cycles (f, g, h) during the decline starting oct07 to mar09 exhibit a left translation - a bear market characteristic. the present cycle (i) that started jul09 should end with an important trough in nov09 thereabouts. a cycle peak occuring not earlier than late sep09 could likely lead to a higher trough strengthening the case for a continuation of the 5mo uptrend.

PRICE PATTERN: the inverse head and shoulders (J) that developed nov08 and completed jul09 implies a potential upside of up to 11500.

SENTIMENT: all indications point to a developing change in the primary downtrend. the intermediate and short term trends including the ma180 have turned up. for now, the favorable price trends, momentum, the inverse hns pattern and the recently concluded 4mo cycle convinces me that this upturn will likely be sustainable.

POTENTIAL MOOD KILLERS: a break below 8000 and/or a cycle peak in early sep09 will prompt me to reevalute my current sentiment.