Where will the Dow go part two: November 22nd, 2008
November 23, 2008 – 12:40 amIf my fellow chasers remember, I posted an article a while back about where the dow will go. I have done a bit of research and I have a another scenario to offer.
Here is a chart of fibonacci retracement levels off of the 1932 ‘Great Depression” lows and the 2007 bull market highs. Notice how obediently, almost uncannily the chart follows these fibonacci lines. Also direct your attention to the right side of the chart where the dow hung around the 8500 level for the last 3 weeks or so before dropping. I have laid out some blue arrows to show some of the key areas where these fibonacci levels are playing key roles. I would like you to pay attention to the 50% fibonacci level, which was the lows of the 2001 bear market. Look at how closely the dow came to breaking the support line but ended up firing back up with a vengeance. The blue line on this chart represent a support line that we are approaching, the 2001 bear market lows.
This is another interesting chart of how oversold the dow is. This one shows he index with the bollinger bands being drawn in. Again, just wow…..absolutely relentless.
Now even though we are getting dangerously close to the 50% fib line, we have another optimistic candle formation, a bullish engulfing candlestick.
So where does the Dow go? Again I have 6000 dow in my sights but we may see a bounce at these levels.
So how do I play this? A possible idea would be purchasing the index. You can achieve this by purchasing the Ultra Dow Jones proshare (DDM) which provides 2-1 leverage, or Dow Diamonds (DIA) which provides basic 1-1 leverage. Some other things are that come to mind are the most oversold beaten down names as these areusually the ones that come back with the most vengeance. A quick list are steel names, ag names commodities and anything oil related.