Dow Jones re-tests lows…

By Sandy Jadeja 13:19 24- Nov -2008

It seems that the Dow Jones Index has failed to break above the 9404 resistance level and instead tested the lower boundaries.

So far the index has traded at the 8100 on two occasions during October and November. Although the October 7882 key low has not been breached, the current position suggests that it is likely that at some stage this low could be taken out.

The Dow had also failed to climb above 9160 as previously highlighted and instead formed a minor double top pattern before declining lower. The momentum indicator has still not yet traded in positive territory and looks weak for the immediate picture.

The week ahead needs to see the Dow reach above 8928 to target the 9400 level but if we see a break below 7965 then the odds would increase for the market to head lower into late November to mid December.

The recent price action has been nothing less than difficult to trade but has been more suitable for a day trading environment with large intra-day swings. However caution is required as although the extreme volatility can bring short term profits, it also brings larger risks.

Typically the month of November should be a positive month but we are currently down by -8.8% and this is not looking good. If we do not see the markets gain both positive sentiment and momentum then a swift move lower can take the index down to 6800 – 6400 before finding major support.

Time analysis is also suggesting that the low may not be complete before November the 28^th or December 15^th. This would tie in nicely to have a five wave pattern completed on a monthly chart before seeing the next leg up into 2009.