My previous mention of the index testing the 11225 level and not seeing an immediate thrust highlighted the bearish factors at hand. This failure of a thrust took the index below the key Fibonacci 11225 level and now we can look towards the 10700 level as the next major target.
Since 2003 the Dow Jones had rallied to a new high in 2007 from which we have had a significant decline. Most markets will often retrace back to a 50% level which is where we can see the 10700 level and if we can reach this very soon and in a sharp manner then the bulls may finally see a relief rally ensue.
Until then I am still bearish and looking to sell the rallies as well as keeping a close eye on the momentum indicators which are still in negative territory. We would require the Dow to clear above 11445 if any sign of a turnaround is taking place.
However from my viewpoint this looks unlikely for the moment.
Many traders view the current situation as an oversold market but in longer term trends, technical indicators can be rendered useless and hence the importance of paying closer attention to price action. With this in mind, both price and patterns and also the break below weekly lows is not good news for the bulls.
And until a major reversal pattern takes place at a key level one should not get too excited just yet.
We have also not experienced a washout or climax type of sell off to confirm a reversal. Bottoming out is a process and we may be about to see the process complete soon. But until then the bears remain in full control.
Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.