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Although in asking this question the reverse question could also apply. Where is the high? Over the last year we were seeing a rally of gay abandon like we were now on path to resume the ‘economic super cycle’. But alas it was all stopped in its tracks and now there is talk of a double dip. Well that is not something I want to get into here today – maybe later. Nor do I want to get into where the high might be and all that is associated with such a question. Except to perhaps tease and say the high is not that far away in my view. In other words we could be in for range trading for a while yet. Just up and down, depending on what news grabs its fancy. Maybe a time to dust off those range trading indicators such as Stochastic, RSI etc.
To my question at hand: where is the low?
I am going to choose the DOW as it is after all the global bellwether – plus it is responsible for this irresponsible rally. You could also ask why we take so much notice of this wayward adult:
click to enlarge
You will note three short horizontal bars indicating the wave fives – the first at 9600, the second at 9100 and the third at 8200 or thereabouts. Please do not write to me about more precise readings.
The long horizontal lines indicate lines of support/resistance.
The first wave five I expect to be taken out easily. We may see some relief rallies beforehand but that resistance will fall in time. The second one will take a bit more effort to pass – especially as around that level we have seen some support in the past.
The third level is normally a low probability – but in this case I am going to ‘up’ that probability and say there is a relatively high chance we will see it met. But we do not have to form a view on that right now.
One easy step at a time. Let’s see how wave one goes.
Enjoy the ride
Tom Scollon
Chief Analyst
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