Japanese Candlesticks Are Calling For a Bounce in Index Prices
The Dow Industrials Index has been in a fairly steady slide since it made a double top in May.
The Dow has already spiked down beneath its March low, which may turn out to be an important waypoint.
The S&P 500 has tagged along in quite the same overall pattern.
The declines in the NASDAQs, the S&P 600 SmallCaps, and the Russell 2000 have been more chaotic.
All of them are at or near lows of about two months ago.
The patterns that we are seeing today in the Candlesticks and in the various Indicators for the Dow Industrials and for the S&P 500 suggest "indecision" and the possibility of a trend reversal.
The price patterns in the NASDAQs, the S&P 600, and the Russell 2000 are much more persistently downbeat.
They are "leading the pack," as they often are wont to do.
No Candlestick pattern, or Indicator, or group of Indicators, is foolproof.
However, based on the historical record we know that certain patterns are generally reliable in their prediction of the direction of price trend.
We could be fooled this time, just as we have been fooled before; but the patterns are so clear and so prevalent across several Indexes that the odds seem to say that prices will bounce from approximately this point, or from moderately lower levels.
If they do rise, how far are they likely to go? Again, on the basis of historical precedent prices may be expected to retrace between 38% and 62% of the previous major decline.
If history holds true this time, we might expect to see the Dow top out at between 12,270 and 12,600.
The strength of the decline since last October may rule out anything much more than a very modest bounce.
Likewise, the "drag effect" of the NASDAQs, the S&P 600, and the Russell 2000 may put an early stop to any rise in the Industrials and in the S&P 600.
Today is the first day of the two-day meeting of the Fed's Open Market Committee.
We expect to hear the result of its deliberations tomorrow afternoon.
Any spark of good news might tend to set the market off in an upward direction.
There is ample speculation in the marketplace about the likely course of interest rates.
The Fed is caught between a desire (on the one hand) to increase interest rates in an effort to tamp down inflation, and (on the other) to lower them as an attempt to light a fire under the housing market.
Unfortunately, there is a degree of mutual exclusivity there; the Fed (and the country) cannot have it both ways.
Regardless of the outcome of the meeting, it does appear that the odds are increasing in favor of the proposition that we can reasonably expect to see a bounce in Index prices quite soon.
We shall see.
William Kurtz June 24, 2008http://www.
candlewave.
com
The Dow has already spiked down beneath its March low, which may turn out to be an important waypoint.
The S&P 500 has tagged along in quite the same overall pattern.
The declines in the NASDAQs, the S&P 600 SmallCaps, and the Russell 2000 have been more chaotic.
All of them are at or near lows of about two months ago.
The patterns that we are seeing today in the Candlesticks and in the various Indicators for the Dow Industrials and for the S&P 500 suggest "indecision" and the possibility of a trend reversal.
The price patterns in the NASDAQs, the S&P 600, and the Russell 2000 are much more persistently downbeat.
They are "leading the pack," as they often are wont to do.
No Candlestick pattern, or Indicator, or group of Indicators, is foolproof.
However, based on the historical record we know that certain patterns are generally reliable in their prediction of the direction of price trend.
We could be fooled this time, just as we have been fooled before; but the patterns are so clear and so prevalent across several Indexes that the odds seem to say that prices will bounce from approximately this point, or from moderately lower levels.
If they do rise, how far are they likely to go? Again, on the basis of historical precedent prices may be expected to retrace between 38% and 62% of the previous major decline.
If history holds true this time, we might expect to see the Dow top out at between 12,270 and 12,600.
The strength of the decline since last October may rule out anything much more than a very modest bounce.
Likewise, the "drag effect" of the NASDAQs, the S&P 600, and the Russell 2000 may put an early stop to any rise in the Industrials and in the S&P 600.
Today is the first day of the two-day meeting of the Fed's Open Market Committee.
We expect to hear the result of its deliberations tomorrow afternoon.
Any spark of good news might tend to set the market off in an upward direction.
There is ample speculation in the marketplace about the likely course of interest rates.
The Fed is caught between a desire (on the one hand) to increase interest rates in an effort to tamp down inflation, and (on the other) to lower them as an attempt to light a fire under the housing market.
Unfortunately, there is a degree of mutual exclusivity there; the Fed (and the country) cannot have it both ways.
Regardless of the outcome of the meeting, it does appear that the odds are increasing in favor of the proposition that we can reasonably expect to see a bounce in Index prices quite soon.
We shall see.
William Kurtz June 24, 2008http://www.
candlewave.
com