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Attached is my 3 year chart of INDU.
A brief explanation of what most of the lines
represent.
Upper most and lower most diagonal red lines are
the 20 year channel.
Intermediate red diagonal is the 1994 support trend
line.
Horizontals are Fibonacci retracements (red = 1932
base (the 2001 top at 11750 on 14/01/01 is mostly hidden by the blue); magenta =
1932 base (top is same but hidden); blue is Asian crisis 09/98
base.
Diamond reversal formation is in dark green.
Initially the conventional wisdom was that the diamond was bounded on lower
right by the 1994 support trend line, and a closer examination would demonstrate
the high level of significance of that line.
I have generally preferred a shallower lower right
facet to the triangle and in drawing it I purposely ignore the down spike of
18/10/00 which was induced by a delayed and markedly lower opening of IBM.
My lower right facet has not been as technically impressive as the 1994 support
trend line, however, at the moment it intersects with the original resistance
line for the bear market.
That resistance line was briefly penetrated upside
in May and June of 2001 (hence giving rise to the yellow bear line which has not
been violated since the start of the bear), but the original line has otherwise
been inviolate.
As well I would observe that the upside excess of
May-June 2001 was mirrored by the downside excess of Sept 2001 when INDU left
the bear channel defined by the two downward sloping green lines and indeed for
a couple of days even went underneath the 20 year support trend
line.
The magenta fan is a Gann Fan. Its upper most
line is hidden by the upper right facet of the diamond. If one follows the
price action over time since 14/01/00, then one can see that the fan lines more
often than not present zones of support, resistance and
confinement.
On the basis of this chart alone, I am inclined to
think short at the moment by reason of (i) the move from Sept 01 through three
Gann zones (strong), (ii) the classic retracement to the apex of the right
triangle of my diamond (the facets are unorthodox), (iii) approach to
the original resistance line of the bear (strong although INDU is not always a
technically obedient index/average), (iv) the move of INDU since Sept 01 through
the whole of the original bear channel and (v) the resistance which is
implied by the Fibonacci retracement line at around 10750 (blue horizontal) and
the previous price action at that level.
My enthusiasm for a short position is tempered by
the fact that half of the indices I watch have just broken their 200 SMA's (CRB,
DJTA, NIKKEI, S&P500, TSE300) and the others are rising to or near their 200
SMA (FTSE, NASDAQ, DJUA)
FWIW. I am not licensed to say these things
to the public so this must be considered a private something or
other.
Tony Pylypuk
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