Dow Jones Correction

Click charts to enlarge

The charts above are daily and weekly bar charts of the cash Dow Jones Industrials with 50 day moving average and fib retracement overlays on the daily and 50 week moving average on the weekly.


We believe that particularly the daily chart illustrates at least a hint of the beginning of a corrective phase. How much of a correction of course is the $64,000 question. But we saw last Friday a new high for this move with a lower close. That is a reversal even though it wasn’t a sweeping reversal event. And there has been some follow through to the downside too which helps add to the correction theory.

The pattern constructed since the day of the high we feel also fits the theory. There has been a one wave down, a pause and another more accelerated down move made. Today’s action has been another pause in the action with a tight range from slightly higher on the day to slightly lower. Tomorrow may be helpful in providing additional clues.

There are also the monthly unemployment figures due Friday morning. With employment such a large factor in the sustainability of economic recovery, the report will most likely be heavily weighted.

Where do we go from here? We see there has been a trend line broken and that the first set of Fibonacci retracements has been penetrated. There is a possibility that a Head and Shoulders top formation could be in the making but we will have to wait and see. Currently the 50 day moving average is approx. 8953 and the next series of noted retracement levels of support are approx.: 9041; 8859; 8677.

The weekly chart displays what could be construed as a Head and Shoulders neckline. It would appear to converge with the uptrend line displayed at approximately 8760. The 50 week moving average as shown on the chart is approximately 8557.

If the market is indeed correcting, the retracement values given along with the moving averages or a return to the neckline all mentioned above, could be price levels the market is seeking.


It may be early in the game but as we all know, it’s the early bird that gets the worm. It may not be unreasonable to expect any or some of these levels to be reached if in fact the market is in corrective mode.

And then again let’s not forget that there is a segment of the trading population that believes that what is about to unfold is more than just a mere correction.

We believe we can help assemble strategies for this and other market opportunities. Let us know if we can be of assistance to you.

jmajer@mfglobal.com

312 261-7380
800 321-5810

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