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A low for the Dow

Posted by Dan on September 28, 2015

Stocks pulled back again last week. But the decline is orderly and with only a few more lunar red period days to go we can start looking for a possible buying opportunity. Let’s have our weekly look at the S&P 500 chart (click image to enlarge it):

S&P 500

The 1900 level was major support/resistance throughout 2014 and is now becoming important again. Technically, my Earl indicator (blue line) is falling back below zero, but not showing any signs of a bottom yet. The slower Earl2 (orange line) is still going up with further room to rise. The most likely scenario is for the faster Earl to bottom out later this week, and that would set the stage for a nice rally in the upcoming lunar green period during the first half of October. An S&P 500 close below the 1900 level could spoil the party, but that remains to be seen.

As chart of the week I am choosing a weekly chart for the Dow Industrials (click image to enlarge it):

Dow weekly

My three “bread and butter” indicators have all dropped to extreme lows not seen since late 2011. The MoM indicator is already flattening out, ready to turn higher. The Earl2 and ESe are still going down. While this doesn’t rule out a further drop below 15k in the coming weeks, the more probable case is for a gradual rebound that will stretch into next year. If the market stagnates just above 17k come January/February, then we will be at risk of a much deeper decline. But my best guess is that we won’t see that deeper decline. I think we are in for a prolonged sideways period, with the Dow hovering between 16k and 18k for another year or so. Until investors are utterly bored with stocks.

Note: the LT wave chart for October will be posted next Sunday.

Click here for a copy of the weekly reversal for over 1500 stocks and ETF.

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