2 months back I shared big picture charts of Dow and SPX and even today, the picture is the same except that the risk is heightened. There is no strong buying in the market and markets just fall simply even due to the weight of selling. Though we are seeing intense selling, it is still not very intense what it was in Oct/Nov and so I think caution needs to be practiced. It’s very hard to control emotions especially when you see lot of “potential opportunities” or “foregone profits” because you were siting on sidelines, but I think capital preservation is more important than missing opportunity.
Here is the latest chart of the DOW Bull Market that started mid 1932 till all the way Oct 2007. We are not very far from one of the major support, or call it double bottom for the lack of complex technician words. If that support is gone, we are looking for 6,000 as next level of support (technically it is around 5,900). According to Richard Russell of Dow theory, The transports have already closed below Nov Lows, if Dow Industrial will confirm that, we are setting up for disastrous moment. If Dow doesn’t confirm, then we have potential bullish signal. Net, we are at crossroads and next few weeks are going to be crucial.
Watch out for the next few days action. I think either the next week or week following we’ll have voting on stimulus package which will provide temporary relief to the markets. And oh BTW, as goes the January, so is rest of the Year, and the Jan so far doesn’t look good.
Profitable Trading, OP