Stock Market Index Trading: Dow Jones Analysis 2008

This stock trading video gives a brief technical chart analysis of the stock market, specifically, the Dow Jones Industrials Index for January 2008. 

(NOTE: When the video plays, you should right-click, select zoom and then choose the Full-Screen option).

This makes it clear that for stock trading purposes, the Dow Jones is poised at some very key levels. It is currently on some very major support levels, and hence it needs to hold these levels in order to avert a major collapse to the 11, 650 level, from where even further stock market declines could be easily seen. The negative side of this story is that we appear to have a fully developed and completed head and shoulders pattern, implying the target just stated. However, on the positive side, there are a number of major support points coming in on various time-frames, right at where the market is trading at the time of this trading video.

Hence, from the point of view of trading the stock market, it might be well worth looking at a long position with a tight stop below the current lows as these levels must hold on the long-term (e.g. an intra-day penetration of several dozen points does not really count as a break) in order for a major decline to be averted. Hence, one would be trading with the idea that the head and shoulders pattern will not follow through. However, if on a weekly close basis, you were to see the current support levels break (see video for precise details), then we would indeed expect to see sustained declines.

One thing I did not mention in the video is that the Dow Jones Index all-time high occurred in October, and this is almost exactly 20 years to the day from the Stock Market Crash of 1987. Hence, from a Gann time cycle point of view, it would indeed make sense if the market was making a final top before a sustained decline or even a bear market.

The present levels really must hold in order to avert all of that. Hence, traders could consider buying at these current key support levels with the idea that the collapse will nto occur, but then be prepared to stop and reverse to the short side if the market continues to show signs of continued weakness and decline.

Asoka