FXstreet.com (Barcelona) - In the April 2nd email on the Dow Jones Industrial Average, said that at least some further upside was favored as the pattern not complete. Reached the buy target a few days later at 7850/75, but said to use an aggressive trailing stop on a close below the bullish trendline from early Oct, as further new highs may be limited and part of a larger topping. The market did indeed continue to chop higher, testing key resistance at the ceiling of the bearish channel from Oct (last week's high at 8191) but before reversing lower, breaking below that trendline (then at 7950, closed at 7920 for at 45 point profit). Currently, the Djia remains down from that key resistance area (ceiling currently at 8160/85) and with the market overbought after the 26% surge from early March, suggests at least some further downside may be ahead. Note too the new sell signal on the daily macd (see bottom of daily chart below) adds weight to this near term bearish view. For now want to be short and would sell here (currently at 7935), initially stopping on a close above the ceiling of the 6 month bearish channel. Though a relatively deep pullback is favored (potentially even a retest and slight break of the March 6470 low, see longer term below), the confidence at this point is not extremely high, so may want to switch the trailing stop to something more aggressive on further nearby weakness. Nearby support is seen at 7525/50 (38% retracement from the 6470 low) and 7325/50.
Longer term, no change in the view over the last few months that the market is likely within an extended period of wide ranging, and with scope for another 6-9 months of the same ahead (some potential for a marginal new lows). Still view the market as completing (or nearly) the whole 5 wave fall from the Oct 2007 high at 14198 (wave V, see numbering on weekly chart/2nd chart below), adding weight to the view of further wide ranging ahead. In general, this is not the type of market to chase bigger picture moves/breakouts, but more one to fade extremes. Note too that the moves within this period of wide ranging have been, and are likely to remain substantial on a % basis (if this scenario does indeed continue play out).
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