The Dow Jones Industrial Averages has finally hit the 50% retrace point this week, making what appears to be the major high for 2009, or final top of its massive bear market rally – see Chart. This top was mentioned in previous articles here, as likely being around the level of 10,360 points, the 50% retrace of the Dow’s entire run down, from the 11 October 2007 extreme high, down to the 9 March 2009 low. How high can the Dow Jones go? These articles show why we are technically still in a bear market:
DOW JONES October 2009 Rally breaks 10,000 points
DOW JONES Major High September 2009
The Dow Jones index shot up on Monday and hovered around the 50% point most of the week, unable to gain ground, before falling back below it late in the week. November 20 was previously mentioned as one of the significant time points to look for a reversal. This current time point is the most significant of all, especially when coupled with the price level, as will become evident. The Dow has finally recouped 50% of all losses shed during the global economic crisis, and in 50% of the time it took to lose them! Yes, you heard right, the unpublicised fact that 50% gains have occurred in exactly 50% of the time it took for the losses. This is why this current point is the most powerful for a reversal. In fact, the halfway point in time falls this weekend, so the actual top could be last week or the coming week, but either way, this week will prove the reversal! Gann would call this point, a “Perfect Square” – 50% in price, meets 50% in time.
In addition to this, we have just completed 110 weeks from the all time high, and as most technical analysts would know, 110 is a twin Fibonacci 55. Also, multiplying the March low of 6440 points, by the Fibonacci ratio of 1.618 gives us 10,420 points, which is almost exactly the high reached this past week. And finally, the Dow is sitting just under the 1994-2002 bottom trendline. These are all very strong indicators that we will see a major reversal on the Dow this week – so if you are thinking of going short, this is the time to load up – SELL!
In the extremely unlikely event that the rally continues (a miracle of economics), I would highly recommend buying Gold as the ensuing inflation will be unbelievable and currency (especially $US) will become almost worthless. Eventually the stock market drop would be a devastation, rather than a correction.