Wednesday, June 24, 2009

A Poor Close For The Dow

Whatever conclusion one may wish to draw from today's action, it is not that it was a bullish day with the Dow closing near yesterday's low and under the 50dema. While the SP500 and the Qs closed up for the day, volume was lighter than yesterday.

It is also clear from the intraday action that the morning rally in the Qs traced out 3 waves up. Even if it extends tomorrow, we should expect lower prices afterward.

If the upmove in the Qs does extend, the measured move target is 36.19. We can then calculate a measured move downside target of 33.73, which fits with previous calculations. If it does not extend, the measured move downside target is 33.41.

The primary reason that I do not believe the correction is over is that the Qs have yet to tag the 50dema. It is not a requirement, but it is a high probability after the Golden Cross, which we have discussed previously.

The Dow components are a mess, with most showing bearish patterns. WMT in particular appears ready to break down out of a bearish triangle. I think the Dow is going down to retest the Oct 08 and Jan 09 lows before the correction is over.

On the bullish side, ORCL broke out today on heavy volume and I will continue to hold it throughout this correction unless stopped out.

Gold is following the seasonal pattern so far, closing in the lower half of the range today and below the 50dema. It is on track to make a low in early July. That may be a good time to take profits on short positions in gold as it may complete 5 waves down from the June high at or below the 900 support level and near the 200dema. We could then wait for a retracement rally to re-enter short.

Let's continue to be patient as this correction unfolds. I think patience will be rewarded.

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