Stalking Major Moves: Looking for Signs of Where the Market is Headed (Part 2)
10/14/2008 10:28 am EST
The Dow was just below 13,000 before my interview last November, and I told Tim Bourquin that I felt the Dow would break the low of the last major recession, 7300, sometime in 2008. Even though there was no credit crisis yet, no bank failures, no bail out packages to lead me to my conclusion, the charts told me all I needed to know: Prices were headed lower and probably quite a bit lower.
Let's look at the chart that was drawn just before this past February's Traders Expo, held in New York City, and see what clues it offered about the direction of the Dow and what I said in my interview with MoneyShow.com:
The Dow spiked lower in mid-January of this year and then began to climb higher - a change in behavior. When it began to make higher highs and higher lows, I added in an up-sloping median line set. When speaking with Tim for the MoneyShow.com interview, I told him the Dow was still well below the upper median line parallel, drawn off the high at Pivot C and the new up-sloping median line was only gently positive, so I felt that while the market would consolidate and perhaps rally a bit higher, the chart still looked bearish to me. I still felt we'd see a move to 7300 in the Dow during 2008.
More tomorrow in Part 3.