DOW MonthlyDOW completes the 2-month thrust pattern down from January’s 50% level into February’s lows:-- DILERNIA PRINCPLE
I mentioned at the start of February that a move down into the February lows in the first 2 weeks of the month has the potential to reverse upwards 25-30%.
The completion is occurring at the end of the 3rd week.
We have three scenarios….
SET-UP A:- reversal off the February lows next week back into the March 50% level and then continues the down, as it follows the Primary cycles into lower levels.
SET-UP B:- for any 25-30% reversal to occur, the last week needs to bounce and swing back towards 8280 over the next 5 days.
If that occurs then there is the view of a slight push higher in March to complete the remaining percentage move.
At this stage it’s occurring a bit late in the month for me to be confident that SET-UP B is going to play out.
Set-up B is a retest of the 3-month highs in March and then the
market continues down into lower lows in the 2nd Quarter.
SET-UP C:- fails to hold February’s lows and continues down in another breakout pattern, similar to October in 2008.
Regardless of any bounce off these support levels in February, or even if Set-up B occurs, US markets are going lower in 2009, as they need to complete the Primary target in the low 6000’s
S&P WeeklyExpectation the S&P was following the same pattern down, and this was confirmed with the break of the Weekly lows this week.
Expectation that the S&P has a little bit more room to move towards 723, before it finds it's lows.
If the DOW has completed the move but the S&P hasn't, then there has to be a large drive down next week lead by Financials
Note:- there is a Weekly low breakout this week, and it's not often that the market will reverse UPwards the following week.
The normal pattern is for the Weekly range to remain range bound below the Weekly 50% level and the Weekly lows;- Monthly support
If that is the case SET-UP B is looking less likely to occur.
DOW Weekly
Based on last week's breakout of the Weekly lows and completion down into February's lows....
It's looking more likely that SET-UP A is going to play out, unless there is a late rally next Friday upwards.
DOW 5-day pattern
The view was always that the DOW was heading down into February's lows, but we needed a breakout to occur for the down move to gather strength.
This occurred on Tuesday with the breakout of the 5-day lows and the continuation down.
In conclusion:- Any bounce of February's lows will be short-lived as there is a view of lower prices in 2009.
- Daily Trading Set-ups & Analysis
