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Attached are three charts of the Dow.
Figures 1 and 2 present the Dow since 1900 and 1977,
respectively.
Of more immediate interest is Figure 3.
It shows the Bear Channel which commenced on January 14, 2001, and the
intersection of that channel with the longer term Bull Channel in existence
since 1982.
Shortly after September 11, 2001, the lower bounds
of the Bull Channel were penetrated, before the market rallied and ran the Dow
through the entire height of the Bear Channel. Since early March 2002 the
Dow has trended down and on June 14, 2002 it plummeted to the lower bounds of
the Bull Channel before staging a strong rally. Bullish? Perhaps.
Certainly a going long for a short term trading opportunity seems
indicated.
What is troubling about the longer term prospects of
the bullish scenario is that the lower bounds of the Bull Channel have now been
tested twice. It is not certain how much more testing the Bull Channel can
withstand. Decisive penetration could result in its lower limits becoming a
ceiling of impenetrable resistance. More importantly, the loss of support
provided by those lower bounds could send the market looking for support at
substantially lower levels – perhaps the mid-point of the 100 Year Channel which
presently sit somewhere around 7,500, if not the lower bounds of that channel.
Those lower bounds are presently around 2,500, a level which is unimaginable
except in the case of cataclysmic disaster of global dimensions, but at the
intersection of the lower bounds of the 100 Year Channel with the upper bounds
of the Bull Channel which may be projected to occur in late 2014 or early 2015,
the level of the Dow is a more believable, or less incredible, 5,500.
FWIW. I remind you I am not licensed to say
this for profit.
Tony Pylypuk
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