Dow Jones index declines into key support…
By Sandy Jadeja
14:31 20- Jan
-2009
After a -12% decline the Dow Jones index is now sitting at a key short term support level.
It seems that we are still in a sideways congestion pattern and stuck between two ridges. Until a major move occurs to take the index in the desired direction we will have to either sit and wait on the sidelines or trade between the channel boundaries.
The upside targets in place are 9137 – 9658 of which the 9137 level has already pushed the Dow lower. At present we are now sitting on 8075 which is the Fibonacci support level taken against the November low and has already been tested during early December. If the index is going to rally then it will need to do so quickly. Failing a rally the index could fall further towards 7800 followed by 7500.
On a bearish note we had a Sell signal on January 8th as shown by the RSI indicator which also added weight to see a decline take the Dow to lower levels. This is not good news for the Bulls who have been trying take the market up since later December. We clearly have a struggle on our hands between the Bulls and the Bears and there will be an announcement of the winner fairly soon. The current setup is likely to see a big move one way or the other.
Typically seasonal traders will be hoping to see the month of January finish higher as this would be a good omen for the rest of the year. However the January effect has been loosing reliability over recent years and I would not look at this as a tradable factor just yet.
For the week ahead the Dow will need to get above 8350 to reach up to 9137 again or a failure below 8070 is likely to see a continuation to the downside.
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.