I posted on last Thursday that Dow Jones was sitting on major support level , and I told myself to be cautious if the Dow Jones support gave way. Indeed, Dow Jones plunged 300 points and the support cracked. It also cracked the year low formed beginning of the year and the overall stock market trend looks very bearish at of now.
You can see that there are 2 dark candle formed on DJ on Thursday and Friday. I supposed it will take a break today as I am seeing the index is hovering around Friday close.
What can we learn from stock market trend?
Ok, let’s do a post mortem and learn from this market trend. Firstly, lower high and lower low was seen on the DJ chart since mid may after hitting the resistance of 200d MA . That’s the first sign of a beginning of down trending market.
Next, we continued to see that all the major Fibonacci support all gave way , that’s the 2nd warning of sign of a down trending market.
Finally, the market gave up all the gain that it made between Mar-May 08, and sitting near the Mar low, which was near the support level last Thursday.
Unfortunately, the support did not hold and it cracked and 2 dark candle was form on Thursday and Friday. That’s a bad bad sign of a market and I am very bearish on the market that it will continue to drop till the next major support level which is approximately 10725.
In a down trending market, stochastic will remain oversold and I will not use it to trigger any position at all. It won’t be accurate. RSI is below 50% suggesting down trending market too.
Though I see the volume divergence formation, however, I won’t foresee any reversal, because more higher volume on plunging market will trigger more panic selling. It will not trigger any reversal at all. The accum/dist indicator is confirming a continued distribution as the indicator is still point downward.
So, summary, DJ is in very bad shape now. The oil price has just hit any new high and that will exert higher pressure on higher inflation, which can trigger Fed to do something about it. So, my take now is that won’t be any good news expected near term.
S&P500 is Sitting Near Major Support Now
Let’s look at another major index in US stock market, S&P500. Despite the plunging and cracking of major support on Dow Jones, S&P500 is still holding firm on its major support now which is near 1270-1274.
It will be interesting to monitor on this index now. If if S&P500 also surrender its major support now, then the US market will definitely be in a bad shape. You can see all the indicators look very similar to Dow Jones, that’s a warning message for us!
DISCLAIMER: This information is used for learning purposes only. It does not constitute an offer or solicitation to buy or sell. You should do your own analysis on top of my postings.
