DJIA: Preparing for the pull back

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February 11, 2014
DJIA lagging in bullish momentum
February 17, 2014

Dow Jones has most probably finished 5 waves up from the recent low at 15340 and has reached the 50% Fibonacci retracement of the decline from it’s all time highs. Additionally DJIA has back tested the broken Ichimoku cloud support that has turned to resistance right now. Are we still in a downward correction or have we seen a longer-term low at 15340? The rise from 15340 is most probably over and we should expect a pull back towards at least 15760 (38% Fibonacci retracement). The form and pattern of the decline will clear things up. If the anticipated pull back is impulsive and breaks below 15600 we should not forget the bearish scenario that implies that we are still in a downward correction and that the move from 15340 to 16036 was just part of the corrective process, possibly as wave B.

dowdaily

So if we just completed a sequence of wave A and B, we  should  expect wave C to bring new lower lows as part of a larger degree correction. Since many scenarios are equally possible and still valid we need to be cautious until either the bearish or bullish scenarios get canceled. For now we expect a pull back and the form of the decline and its steepness will decide if we should expect more selling pressures or should we position ourselves to buy expecting new higher highs.

dow60m

The current market position is very critical as a lower high relative to the all time highs, combined with the increased volume at our highs as shown in the chart above, could have bearish implications for the near future. For more help trading this index become a member today. As always, thank you for taking the time to catch up on my thinking.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.