My last post on the DJI (Dow Jones) was bullish and I should have commented on what levels if broken means the trade is invalid. Sorry :<
Lets have a look at the charts,
Looking at the daily chart we can see the reason why prices acted as they did (so far).
The major pattern is called a triple top which is one of the most strongest potential reversal patterns there is. I number the tops from 1 to 3. Also looking at tops 2 & 3 we see a double top formed.
Now the way to measure a move from a double or triple top is from the highest top to the neck line (see the measurement arrows. So first to go was the double top of 461 points to hit support of the previous lows.
Notice the one day rally at this level.
Also notice that the moving averages haven't crossed over so the trend is still hanging in there.
However the rally failed the next day and the triple top set in with an expected 1,016 point range.
This it did in such a short period of time it scared everyone!.
Of course the news stories effected the panic selling but the charts show that its not just random numbers.
Now lets look at the weekly
Another exhaustion pattern called a head and shoulders. I have drawn the neckline. Again near perfect measurement of the range. In this case its 1,151 points.
The interesting thing is that the Moving Averages have not crossed over at all so the trend is still up, though price action may go sideways until it forms another pattern.
I hope this helps give clarity to the markets without talk of sovereign debt and AAA ratings.
Enjoy
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