Dow (cash futures)
(based on 30-year advanced data charts)
Yearly: we could do with a bit more downside to shape up the perfact head and shoulder pattern there and more interestingly, I can see the right shoulder being shaped up within the next two years, so if you are a bear, you need to wait for another 2 years until your bear claws are needed. Keep hybernating, bears, you don't want to wake to the ugly bull run yet. The right shoulder line is near 11500, almost doubling up from here.
Quarterly: near term, we see a key resistance near 9000. And this is where things get complicated with two distinctly different scenarios. One is for a major pull from 9000 towards some sort of lifeline down there, perhaps to 7600 or 7200 or in the worst case scenario to 6950. Scenario 1 gives us a top of the right shoulder in 2010 and scenario 2011/2012 and scenario 3 a bit later still. We have to correlate these with the moo river watch. It all depends on the reaction when we have hit 9000 on renko (quarterly) and the chain reaction around the world.
Monthly: increasing complexity here to see the way forward. This current rally seems to have gone far enough to negate the possibility for a W shaped rally, as it is more likely to be a V shaped rally. As such, it might reach a medium-term top near 9200ish, then a small pullback, then go upwards and onwards again.
Weekly: (I have just had a fantastic moment when I managed to scroll all the way back to the 1970's, which I means I can patch them together on paper and study them in great details, Bingo!). Anyways, things are getting more and more complicated with further details appear on shorter term time zones. What it says there is that this bull run has further to run and it is certainly more like a V shaped rally than a W based rally, as we have gone far too further over the base now.
Daily: it is scary to see that this greatest bear market of our history did not manage to break the long term trendline, which is an uptrend line. Someone has been watching this trendline carefully and made the timely interventions or was it the fair value line of all the human endeavour so far. Increasingly, the top before a major pullback is somewhere above 9000, into 9200/9300.
Moo River Watch
Price chart: while we are stuck in a cross section between a downstream moo river and an upstream moo river. 2009 is the year when the market wants to find out how high we can recover up to; and 2010 could potentially be the year in reversal, where the market again wants to find out how low it wants to get to again! The worst case scenario for investors is that some of us have missed this bull run for 2009 and then get convinced it is a bull market, start to turn into a bull in 2010. If you are a long term investor, you must have experienced similar things, when you are bearish, market keeps on going up, when you turn bullish, market keep on dropping, as if the market is against you. It is not the market that is against you, it is you who has timed it poorly. It all depends on the time horizon. At each time horizon, there will paradigm shift from bull run to bear run, and vice versa, it happens from 1 second all the way to yearly to decadely etc.. This is why it is important you need to know which ones are your dominant time zone where you make your investment decisions. For example, if your investment horizon is as long as Mr Buffet's (decadely), then yearly jitters are seen as buying opportunities. If you are a daytrader, then your time frame will be considerably shorter. Once you have decided upon your dominant trading time frame, then you need to focus on the main trend there, while any shorter time frame jitters (meaning movements against your expectations) need to assessed against your pot, to see whether they are tolerable or not. Nobody in the world knows how high this market can go up to, and everyone can make their speculations based on their own judgment and analyses, but it is important to note the theme for 2009 is to probing high, enough said on that one! My own speculation is based on the three triangles there on the chart, for now, let's focus our mind on a yearly top near 9500, we will take one triangle at a time.
All momentum indicators are not bullishly configured, suggesting tremendous bearish intent lurking in the background.
Price chart: if we have seen the top of this quarter already with 2.5 weeks left, we should be reasonably satisfied as bulls, this green candle bar has covered the same body length as last quarter's red one so far. It is possible that we have seen this year's low already, and may well maintain above 7500 from here onwards. The task is to cross over from the lowerbank to the upperbank, while continuing to probe higher. Still, it is possible to move across in the midstream of this triangle, within more or less the same quarterly range for the next few quarters. The time line in this smallest triangle is up to Q4 2010. If that happens, the golden age for daytrading is back, as many punters will be able to make money under reduced risk. This is obviously an ideal scenario not many market makers can tolerate for too long. Quite often, market movements are stop killers by market makers. What you can do from here is to based on your trading plan on the current quarterly range, while working out Plan B for a break out higher and a Plan C for a break out lower. Then, I think you will be able to enjoy several quarter's solid profitable daytrading. While most hate range trading as if the market is not going anywhere, it is in range trading that easy money can be made at reduced risks. Intuitively, I am thinking it is more likely that the market will break out higher, as there are still so many walls of idle money sitting on the sideline and so many investors having a bearish sentiment, especially in the West.
RSI: bullish, in the process of crossing from lowerbank to the upperbank in the ginormous downstream moo river, but it has now hit resistance line 1.
All other momentum inidicators are supportive and not overbought yet.
Price chart: this is the fourth green monthly candle, while there are still so many people doubting whether this is a bull run or a bear market rally, I think the proof is already in the pudding, none of the bear market rallies can sustain one month after another for so long. But at the moment, we are suffering from the mountain climber's fear, as we do not want to look down! The higher it goes, the more fearful it is to look down! Para sar dot has not turned green. We have hit the second key resistance line.
Momentum indicators are all bouncing up from lowerbank to cross over to the upperbank, but several are nearly hitting resistance lines. The correlated W on several of them are really encouraging for the bulls, and we are not overbought yet.
Price chart: if EWT is to be trusted, then we should not get above 9028, but I have seen so many anormalies to normal EWT patterns that I think there are laws about nature, but nature creates the laws, not the other way round, as laws do not rule nature itself. (check out my usual weekly forecast in the Weekly forecasts and results). We have just negated one possible M top and now we need to hit some ceiling somewhere to ensure a pullback.
RSI: we are in this new upstream moo river and we did not stop at a key upperbank last week, which is interesting.
Momentum: interestingly, we broke a triangle there and are now in the upstream moo river. If you follow the standard theory of triangle breakouts, then there is more upside to come yet.
All other momentum indicators are supportive, not showing visible signs of weakness yet, no M's, but we are somewhat in overbought territory, e.g., Stoch is at 96's.
Overall, everyone is expecting a pullback somewhere somehow sometime, but nobody knows when where and how far it will go down to. It is the classic waiting for the second shoe to drop scenario. I have to make up my mind in the Weekly forecasts.
(disclosure: I do not hold any positions on dow futures)