Wednesday, March 12, 2014

Dow Jones Analysis for the next Months - Weeks - Days

Monthly Chart

In any chart, first we have to look at the bigger picture to know were we are and what can happend in the future.

In this monthly chart, we can see how the price have form 5 impulsive wave from 1982 to 2007 and now its making a 3 wave correction (A-B-C).

The A wave it was sharp and fast, and make a low in 2009 so wave B needs much more time to develope. Since 2009 wave B has retrace all wave A, that means it´s a strong wave B, but also we have to think that once the wave B finish we have to be prepare for a sharp decline for wave C.

Take notice that at 16,810 Wave C equals Wave A, just to see what happend if we arrive.

If we study Benner Cycle Theory, we have to be thinking for a Top for Wave B, around 2016-2017, making a Low around 2022 but that´s all theory and what matters it´s price, and wave formations.

It´s important to know in which part of the cycle we are, and after follow the price really it´s the only thing that matter in the markets.

It´s important to notice that price it´s at the top of the wedge that comes from the top of wave 3 to wave 5. At this moment the wedge it´s acting as a dynamic resistance, so we have to be thinking that price can go higher in the next months but at the moment will need more time to make new all time highs due to that important resistence.

In the next charts we will go to lower time frames in more detail.

Weekly Chart

In this weekly chart we can see how strong the price has move, making a wave (A) and wave (B) has retrace 38,2% of the prior wave.

We are now in a strong wave C, but we have to be cautious because the price it´s very close to the 1,618% of wave (A), so at this point we have to think for a reversal at any time but it prices keeps bullish we have to move with the price at all time.

When we analyse the market we have to be aware of possible reversal points, not to get short positions but not to open new long positions (specially for buy and hold investors).

In the actual wave (c) green, we can see that´s divided in 5 impulse moves, so the brake of the wave (iv) low at 14,719 can make the price go quite lower. That level it´s the trend line from 2008 Lows, and also it´s the red “moving average” that i use to follow the trends. When we see an area with 3 mayor supports near it makes much more important that 14,719 level.

At this moment we have to be thinking of tighting out our stop in long positions, but still have to wait to open shorts. We dont´t know if this wave (c) can still go higher, so it´s important to control our risk and wait for the market to show us the way.

“The trend it´s your friend” and this phrase it´s really true so don´t try to be to smart in the markets, just think in were are the key turning points and wait and see what happends.

Daily Chart

In a daily chart we can see the bullish trend, actually making a wave (v) up, and the target it´s 16,700 (1,618$ extension of Wave A), so it´s an important area to watch. Although we have to know we are in a wave (v) and could truncate in any moment.

The awesome oscillator makes actually divergence between wave (iii orange) and actual wave (v orange) so it´s make a caution signal, but that´s all.

One of the lessons we can learn from the Awesome Oscillator (AO) is that we just have to follow it´s trend. When the AO it´s positive just look for buying at dips, because the AO it´s really a good trend follower.

The important key level it´s 15,338 specially if we don´t see higher highs above the actual mayor top in 16,588.

While the “averages” have positive slope, are below the price and the price doesn´t form a (1-2-3) pattern we have to look at the upside and try to buy at dips specially when we are in such a bullish market.

We are just in the beggining of a wave (v), so let´s wait for a dip, around the 50% retracements of wait for a trigger to get in the bullish market, always with a stop below 15,338. If this Stop is broken we will have to look for bearish set ups because the Wave (v) would have truncated