The Dow Jones Industrial Average is another of the financial markets that has been ranging, in this case since the Oct 10th low at 7883. Though trade from that low is seen as a correction (wave 4 in the fall from the May high at 13137), there is scope for further wide ranging before the new lows are seen (within wave 5). May also be forming a large pennant/triangle (see “ideal” scenario in red on daily chart below), with the series of 3 wave moves in both directions since the 7883 low adding to that shorter term view (triangles break down into 5, 3 wave moves). For now, would short an approach of the ceiling of the possible wedge (currently at 9600) or if/when better signs that this period of wide ranging is complete occurs first (not there yet). Nearby resistance is seen at 8900/25 (Friday’s high) while support before the 7883 low is seen as the bullish trendline from that low/base of the possible pennant (currently at 7975/00).
Longer term no change as the bearish bias over the last year (warned Oct 2007 of at least 12-18 months of correcting lower) remains in place, but the market is nearing a potentially major bottom (for at least 3-6 months and minimum 25-30% bounce).
Currently, the market is within the final downleg (wave 5) in the whole fall from the Oct 2007 high at 14198. However, this final downleg (which began at the May high at 13137) is still not “complete” (see shorter term above) and suggests a final push below the Oct 10th low at 7883 (also a 50% retracement from the post 1987 crash at 1616) to complete a potentially important bottom (see “ideal” scenario in red on weekly chart/2nd chart below). Note too that time cycles point down into early/mid Dec and fits the view of a final downleg to new lows “ideally” into that timeframe. So for now, would maintain the long held, longer term bearish view but will be looking for signs of a significant bottom on another downleg to new lows (and looking for an opportunity to reverse to the long side for the bigger picture).
