The Dow Jones Industrial Averages made a new high in its current bear market rally, Friday 21 August 2009. Made high at 9549 points, closed at 9506. See also:
DOW JONES October 2009 Rally breaks 10,000 points
DOW JONES Major High November 2009
The Dow’s chart seems to be following the bear market fractal, of its chart from 3 September 1929 extreme high, to the extreme low on 8 July 1932 fairly well. The time and price scales may vary in range, but the same fractals seem to be playing out. This was the most significant bear market in stock market history (1929-32), where 90% of value was lost, and today’s market similarly, looks like being a history maker too. If the Dow continues to follow this course, it would appear to be near the end of this rally in a bear market. 9 March 2009 proved a major low, and from this point the rally commenced with gusto. The rally was essential, for the market was over balanced as a result of the incredible selloff of early October 2008, which flowed into a volatile, but incessant slow run down into early March 2009.
On the fractal of 1931, as applied to now, we will likely see this last leg up as a gun rally, straight up vertical, for 1 to 2 weeks, not much longer. For likely points to hit top, in time and price, we can apply some basic Gann. 6 months, 26 weeks, or 1/2 year going up into September, is a very strong point to look for change in trend. The 50% retrace point for the whole run down from 11 October 2007 (14280 High) to 9 March 2009 (6440 Low), is at 10360 points, and this is the point the Dow needs break, by a significant amount, to show any potential for a true recovery. This is also the level from which the Dow began the massive falls of early October 2008, culminating in the March 2009 low. A soft support level exists at around 8000 points, and we would expect to see faster drops once this point is significantly breached.
The ongoing bear market was confirmed when the Dow broke 2 major 50% points, including 50% of its value from high (14280×50%=7140), by a significant amount (7140-6440=700 points exactly). The other 50% level broken (by almost 1000 points) was at 7425 points, wiping half of all gains (over 33 years) since the 1974 extreme low (570 points, 9 December 1974). In terms of basic technical analysis, Gann style, breaking these points by such a margin would strongly indicate that the market has further to fall, before we see extreme low. Following the 1929-32 fractal, the 6440 low of March 2009 will be broken, never to see daylight again, not for a long time, but should prove a ceiling for a future major high (mid/late 2010) from where it will continue its decline even further.
So its crunch time on the stock market, 1/2 a year up, 50% (retrace) of losses recovered (at 10360), this is the point of a likely top, and the end of the bear market rally. This will be noted as the biggest rally of this bear market run down, and following the fractal, we won’t see another rally this long until after extreme low has been reached (2012, 2014?). Major high may hit in September, but the drops won’t be too bad to start, 2 lower tops will show weakness, and then the real drops should begin (~late November 2009), an unstoppable run down to early April 2010 at least, with only a couple of short rallies on the way down.
Major High – Dates to watch:
September 3 10 16 22
Target Level:
10360 points