A technical look at the Dow
2008 has been rough. The recent losses in the Dow have prompted me to take a step back and look at future support. Unfortunately, or fortunately whichever side you play, the Dow now sits on a critical support level.
The Dow rests right around the 12000 mark which is absolutely critical support. Once penetrated, it is likely that the Dow won’t turn back any time soon. It is very difficult for an index to move out of a price range and then back through it. With any luck there will be any number of institutions ready to buy the Dow at 12000, so I think there is good support here. Unfortunately a fall through 12000 is imminent, I cannot foresee the Dow holding at higher than 12000 for the rest of the year.
After 12000, the next support is around 11700, then 11000. These huge gaps between support is very worrying. For one, the gap allows for a 700 point drop that would likely occur in just a few days. A few days of negative activity of these proportions would put the words recession and bear market in the minds of investors.
The most worrisome might be that the Dow, after falling through 11000, would then move to 10500 which is monumental for the Dow then 10200 which is THE support for this index. A fall through 10200 would strike a near end for the index, the 10200 number is quoted all around as the support line for this index.
You’ll hear many analysts talk about support for the markets tomorrow. This is what they mean, the areas that investors will start thinking the market is undervalued. Hopefully the eventual support isn’t too low.
Market is bad and stock prices are going to go south for a couple of quarters unless the institution thinks that it’s time to buy the beaten stocks and pour their huge cash in the stock market.
-Vats