DowJones about to reach its target
Following my post of June 15 last year, the market topped out and trading became choppy:
back then (@17'743 points) I noted the DowJones is on its way down to 16'000 points. Seemed to be a lot and at that time the overall market sentiment was still bright, so it was a daring statement for some. Ever since, with increased volatility, market has gone down more and more and we're just 200 points away from the target, so I thought it's about time to share an update.
Technical Analysis teaches you to follow rules, not being influenced by the sentiment of the the crowd, and if signals are as clear as in this case, then it is of no surprise to me we're close to reaching the target.
Many people ask me: what's next? Another crash like during the financial crises?
Well, while there are many (scary) similarities in the technical setup between 2008/2009 and now, the fundamental situation however has changed. So how (much more) rough is this ride going to be?
Look for areas of confluence!
area 1: is around 15'525 points and a first stop where the market can rest and eventually bounce off for a short recovery (the 61.8% retracement level of that movement is still a good 945 points or +6%...). But why 15'525? Because many trend lines and Gann fances confluence around that level. The market always rests at areas of confluence before deciding to go one way or another.
But then, I'm afraid, the market will dip deeper.
area 2: is around 14'000 points or more than 12% down from the current level. why 14'000 points? It's a psychological level and very important: it's the 61.8% retracement level of the 2009-2015 bull market run. So while this drop feels like a lot, think again how much we've been rallying up in the last 6 years...
And the Fibonacci-retracement level at 14'000 points coincides with the neckline of the outbreak from the huge 1997-2012 consolidation (can be best seen on the S&P500, works for most other markets as well). Markets tend to re-test their outbreak level. So 14'000 points would be a good area for the market to rest, consolidate, gain strenght and then continue to RALLY up again.
Wanna bet your money on it?
If you bet your money on scenarios far into the future, you can as well just spend your money in a casino. But as a technical analyst, you build up scenarios like these and position your money accordingly while adjusting your stops and revaluate your model on a DAILY basis with DISCIPLINE.