Category DOW

Trading Ichimoku Trend Table : June 2

Here’s my reading of the various indices based on Ichimoku

Trend DOW Jones (DJIA) S&P 500 (SPX) NASDAQ (COMPQ) Russell 2000 (RUT)
Long Term (Kumo) Down Down Down Down
Intermediate (Kijun Sen) Down Down Down Down
Short Term (Tenkan Sen) Up Up Up Up

Notes:

1. If price level is above kumo, it is considered UP or bullish and vice versa.

2. If price level is above Kijun sen (the trend line), it is considered UP or bullish and vice versa

3. If price level is above Tenkan sen, it is considered UP or bullish and vice versa.

DOW Rally : Starts in March, Ends in May

Back in March 2008 (around that time), Bush said, “US is not in recession”.

And around that time, DOW had a rally in March starting from 11,800 and it goes all the way up 13,000 before it stops and reverse (in May). I remember the sentiments that many felt the economy is still healthy.

From May 2008 to July 2008, something happens. DOW reverse and break through critical support level. The rest is history as we know it. September marks the biggest drop that most of us have seen.

Yet, barely one year after this huge drop, lots of analysts are calling ‘green shoots’. All of a sudden, with the recent rally, lots of people is feeling bullish again.

It seems that this rally is so powerful that the problems associated with over leveraged has disappeared. People are once again able to pay off their mortgages. Or is that really so?

Apart from the banks ‘magical mark-to-sky-high’ assets,  is the average Joe’s house selling at 2007 prices? Is the average Joe’s job secured or are there more people who needs assistance from the government, friends etc?

Are consumer spending more or are they tightening their spending?

These are the issues that forms the backdrop of my thought process.

At the same time, I know that there are lots of funds that are sitting on huge pile of cash. And these folks are edgy. They are trying to get back into the market. They need to stay invested.

But, can all these funds in the world push and sustain the market?

I bet not.

They can push it up again when the market dips. But, will the reality from macro economics catch up at some point? I bet it will.

Let’s take a look at the chart again. Following is a Weekly Chart for DOW.

2009may-dow-jones-industrial-800x600

1. From the chart, we can see how the rally in 2008 starts in March and ends in May.

2. The current rally that we are in now happens to to start in March. It is now May. And the volume has tapered off.

3. Will we see the beginning of a reversal? And more importantly, will we see the next big fall?

4. I don’t have the answer. But, I do know that the easy money for this rally is over. For any company to justify a higher stock price, they need to show it with their Financial Results. Even then, we will discount some of the reports because of their excellent ‘mark-up’ on assets.

5. Where does this lead us? Personally, I will be taking profits on the long positions, and at the same time start establishing shorts.

6. Be careful out there. Maybe, there is wisdom behind the phrase ‘Sell in May and go away’.

DOW Trading Range : Week of April 13

It was reported on CNBC that Darryl Guppy mentioned that DOW has a trading range of 6,000 to 10,000. To me, that is a very wide range for the short term traders. (Source : Huatopedia Forum)

Let’s just do a quick glance at DOW Weekly using Ichimoku and see what we can find out:

 

2009apr-dow-jones-industrial-800x600

From the chart, we can safely observed the following:

  1. Index has hit resistance at 8043 and is now turning.
  2. The upper limit of 10,000 that Darryl Guppy mentioned can be found by looking at the kumo resistant level on top. On Ichimoku, it is around 10,287.
  3. The lower limit of 6,000 on Ichimoku as defined by the Chikou Span is the recent low of around 6,607.
  4. On a very short term basis, we will be obeserving if the reversal continues and whether it can stay above the 6,607.
  5. If it goes below this level on the Weekly Chart, we are going to see more ‘blood’ on Wall Street. 
  6. The very sector that has lead this rally will probably be the same sector that can cause the support to break.

 

Thinking Out Loud: What if GM files for bankruptcy? Is GM part of DOW?