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Noel Campbell It seems like every week I want to start off saying, “Aren´t we at an interesting time in the market?”. That just seems to fit all the time when it comes to trading, as the market action is a continually unfolding drama – perhaps a soap opera for the more technically minded. Here goes: we are at a very interesting time in the market on global stock indices. There, I said it.
The SPI200 has managed to surprise just about everybody except Tom Scollon. The rally from the May low proves the power of the Seasonal dates in 2005 and the market is always full of surprises. The last top on the SPI200 came in on the June seasonal date and is now toying with the idea of breaking through, but is not yet completely convincing in either direction. That won't take long to sort itself out though.
Tom wrote a report card on the Dow Jones a few weeks back in the Trading Tutors Newsletter and not all looked rosy for the Dow. I thought at the time it would be worth checking what elements of Gann would back up Tom's outlook on the Dow. I didn't have to look that hard.
Chart 1
click chart for more detail
Chart 1 is the daily bar for the Dow Jones futures contract ( DJ-SpotV ) taking in the market action from around the middle of 2004 to the last session at the time of writing. The Dow made a significant bull range from the 9697 low in October 2004 to the 10987 top in March this year. This gives us a total range, bottom to top, of 1,290 points.
One piece of analysis from Gann that never ceases to amaze with its power and simplicity is the 50% Danger Zone on the bigger picture. The Dow ran down off the March top to low in April at 10,000 neat. Adding 50% of the 1,290 range to the 10,000 low gives us a Danger Zone of 10645. You can see on Chart 1 where the recent high on the Dow and subsequent sell off have occurred just around our key level. Is this a sign that the Dow is going to ambush the 10,000 low? If the lows of last week do not hold you would start to believe an ambush is on the cards. Of course on the flip side, should the Dow push back above the recent highs and therefore the 10,645 level once again, it could be plain sailing to the upside. Like I said, we are at very interesting times.
Until next week......
Noel Campbell
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