Dow Jones Industrial Average is testing support at 10600; failure would add final confirmation of the bear market signaled by 63-day Twiggs Momentum (holding below zero).
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
Bear rally and triple-witching
A narrow range with large volume often acts like a compressed spring — absorbing buying pressure before launching a sharp move in the opposite direction. The spike in volume [W] on Dow Jones Industrial Average was due to triple-witching hour on Friday, but we should nevertheless be wary of a fall below 11400, which would indicate another test of 10600.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
The weekly chart of S&P 500 shows a similar bear rally. Expect a test of 1250/1260. But 63-day Momentum below zero reminds that the index is in a primary down-trend; a peak below the zero line would warn of another down-swing.
* Target calculation: 1125 – ( 1250 – 1125 ) = 1000
NASDAQ 100 Index displays a particularly strong rally, but this remains a bear market. Expect strong resistance at 2400. Failure of support would offer a target of 1700*.
* Target calculation: 2050 – ( 2400 – 2050 ) = 1700
Dow rallies on light volume
Dow Jones Industrial Average rallied on unconfirmed news reports that China is set to buy sovereign debt from troubled Italy. Light volume indicates an absence of selling pressure. This is a bear market, however, and rallies are likely to be of short duration, while breach of support would lead to sharp falls.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
Dow acid-test
The Dow is headed for the band of support between 10600 and 10800 — a real acid-test. Support is likely to fail unless we see a substantial increase in volume, indicating buying support. Breach of 10600 would confirm another down-swing with a target of 10000*.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
Denial is not a river in Egypt
Dow Jones Industrial Average rallied, suggesting a second higher low above primary support at 10600/10800. Expect a test of 11900/12000, but this does not mean the bear market is about to reverse. We are still in the early “denial stage” of the bear market, identified by sporadic bargain-hunting, high volatility and a general lack of direction. Declining volume indicates a lack of enthusiasm from buyers and sellers. Failure of primary support would change that, leading to a sharp fall to 10000*.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
It’s a bear market
The Dow Jones Industrial Average rallied Tuesday on fairly light volume. Expect resistance at 11500. This is a bear market, with reactions to good news likely to be short — and declines from bad news severe. Target for the next decline is 10000*.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000