"Those 3-week highs in both the DOW and S&P are extremely valid resistance zones, and have been all year"
DOW and S&P Weekly
Last week's report and I had the view that US markets were rising up into the 3-week highs and hit resistance.
US markets then reversed down into the Weekly 50% level and found support on Friday.
As long as US markets remain above the Weekly 50% level I have the view that in the Short-term markets are rising higher towards the December 50% levels.
DOW CASH YearlyThe white line shown in the above chart is the 3-week highs.
We can see that the entire year the trend has been heavily dictated by those 3-week highs. Only briefly had price moved upwards in April but quickly reversed back down in May 2008, after reaching the MAY resistance tops.
And currently those same 3-week highs are resistance any further gains in this month after finding bottoms in the November timeframe.
And in 2009 we can see where the DOW will end up at.....
Make no mistake about it, the DOW along with the S&P will be trading around those 2009 lows:
Dilernia Principle follows 2-timeframe wave patterns, in this instance the Yearly timeframe.
DOW Monthly FuturesCurrently the Market is in Set-up A:- drifting lower below the Monthly 50% levels and following the dynamic timeframes lower, as the 3-week highs pushes the market lower.
Eventually price will reach the 2009 Yearly lows, but it still won't be the lows for 2009. But i'll get back to that in a few weeks time in the new Year.
Set-UP B:- Is what I think will happen or hope to happen.
SET-UP B is based on a timeframe breakout.
A Timeframe breakout normally comes back and retests the breakout at the start of the new timeframe, in this instance the Yearly breakout @ 10414 in 2008, and the start of the new Yearly timeframe in 2009.
Therefore my expectation is that early in the first Quarter price will try to make it's way back towards 10414, and then continue lower, but first we still need to see a Friday close above those 3-week highs.
That price action meets the Yearly timeframe breakout.
Once that occurs I would be looking for the next leg of the down trend into the 2009 lows.
If SET-UP B doesn't occur soon, there is a possibility that SET-UP A continues and markets drift lower from January as the new Monthly timeframe continues the trend lower towards those Yearly lows.
If SET-UP B doesn't occur soon, there is a possibility that SET-UP A continues and markets drift lower from January as the new Monthly timeframe continues the trend lower towards those Yearly lows.
