One characteristic of the modern market is the high level of volatility. It manifests itself as very fast moves, particularly on the downside and with large intra-day ranges. The result is that pattern projection targets are often achieved very rapidly.
There are two features to note about the fall in the Dow. The first is that the fall is entirely consistent with the pattern analysis and the targets discussed several weeks ago. The speed of the fall is consistent with the volatility behavior of post-Global Financial Crisis markets.
The second feature is the overall degree of the fall. The pattern downside target near 12,000 is 9.7 percent from the peak of the Dow on May 1 at 13,338. A fall of around 10 percent qualifies as a technical correction rather than a change in trend direction. This makes the 12,000-target level particularly important.
A rebound from this level confirms a continuation of the general uptrend in the Dow that started in 2011 October from near 10,650. Failure of support near 12,000 shows that this correction has developed into a change in the direction of the trend. That calls for the calculation of new downside targets.
Lets take this analysis step by step.Page 1 of 4 | Next Page