Sunday, November 15, 2009

Is Dow Jones Following Rule Book? - A Reality Check

Thus far I have been quite satisfied with the disciplined behaviour displayed by Dow Jones. Right from the very beginning more than a century back, Dow Jones has always played by rules of the game. If we check the super-cycle bull run of Dow as per Elliot Wave, then we find that the 2nd motive wave up from year 1988 to 2000 corrected by about 50% by the year 2003.

After that, 3rd motive wave took Dow up by about 61.8% of 2nd motive wave. That is how we found Dow at its highest point of 14280 in Oct 2007. From there Dow again lost about 50% to trade at sub 7000 level in Mar 2009. Everything seems to be happening absolutely by the rule book!!

From the low of Mar 2009 Dow Jones, like a disciplined soldier, should have exhibited a pullback of 50% to reach 10360. That is exactly what I had anticipated on 02 Oct 2009 in a post titled "Dow Jones- Amazing Bull Charge". Check out the link here - http://archana-archdeb.blogspot.com/2009/10/dow-jones-amazing-bull-charge.html

On 11 Nov 2009 Dow Jones reached 10357.38 to qualify as having completed 50% pullback. Would you not agree that Dow has always maintained a very high degree of discipline? All its moves are by the Rule Book! If you agree to my point of view then do remember that after completing 50% pullback Dow has to retrace its steps from around the level of 10500. By now if you have already checked out the link to my 2nd October post then you must be privy to the likely retracement levels. If not then go right ahead and check out retracement levels from the link given above. Remember that forewarned is forearmed!!