Well the problematic day after Thanksgiving is over. And as I expected, we did not break above the 11,200 level in the Dow marking the upper end of the trading range now going back eight sessions. However, the 95 point loss was greater than I would have thought. This brings us almost exactly back to the middle of this horizontal channel.
And that makes the question of where do we go from here a lot harder. I spent a long time looking at this this afternoon and I think I have the answer. And the answer lies in the weekly chart, which is fortuitous since today was the end of the week. So let's have a look at that. Here's an entire year's worth of the Dow in weekly candles:Here the picture becomes much clearer. The downtrend established on 11/5 appears to be intact here. The past eight days of sideways channeling don't even show up and more importantly, they do not violate the descending RTC channel. Now take a look at the weekly indicators, the RSI, momentum, money flow, and stochastic: all of them have peaked and are now declining. This is consistent with an overall weakening market.
So here's what I think. It looks to me like we're in for some continued weakness for at least a few more days, possibly a week. If we break below the 11,000 - 11,200 channel we've been stuck in for so long now, then the next support level on the Dow is the 200 week MA at 10,943. After that we have support at the plateau established back in August around 10,700, and finally, the 200 day MA at 10,621, though I don't think we'll get that far. In fact, the monthly chart looks a lot more optimistic and I'll get to that next week when I do my monthly review.
Of course, it's important not to read too much into today's action, being a holiday shortened half session when most of the big players are still home digesting turkey. Next Monday should be a better indicator of where we're going. Six of the last seven, and seven of the last 10 years in the Dow have been down on the Monday after Thanksgiving, including the horrifying 680 point massacre in 2008 (remember that one?) Given all of this, I'm going to keep the channeling trend indicator up, but I'm reaching for my short hat.
I lost 0.46% today. About the only consolation I have is that the Dow lost more: -0.85%. This leaves me with a -0.77% week, and a disappointing three week losing streak though I'm still up 23.38% on the year. My only bigger losing streak this year was a string of five weeks back in January into February. This in itself is something of a bullish indicator if you believe that any trend that gets overextended eventually comes to an end. So I'm hopeful to make some money next week, even though I think the first half of the week isn't looking great right now.
I made no trades today.
Imagining the next bear market
11 hours ago