| The Dow Jones
Industrial average has sustained remarkable damage the past 12 months. Although the index recently declined sharply
- nearly 10 percent and 30 days, the trend is still clearly down. Remarkably though, the index has formed an
exact 5-0 pattern on the weekly chart. The distinct structure clearly points to a critical technical test in the coming months at slightly lower levels. |
|
Bullish 5-0 Pattern
- Weekly:
http://harmonicanalyzer.com/share/%5edji-7755-6140.png |
| The 5-0 pattern is a
relatively new harmonic structure that I discovered several
years ago. It requires specific conditions to exist to define this pattern. In addition to the general 500 structure, there are a few other considerations that had to the significance of this project in support level.
To read more about the 5 0 pattern, please click
this to access the free .PDF file. |
| The other considerations that is quite distinct and significant particularly in the 5- 0 pattern is the formation on the distinct
AB=CD from last year's peak. At a minimum, the AB=CD pattern points to an area in the 10,400 range as the projected completion point. |
Bullish
AB=CD Pattern - Weekly: http://harmonicanalyzer.com/share/%5edji-7714-0031.png |
|
The following enlarged chart shows the convergence of numbers in
the mid-10,000 area for the index. |
Bullish
5-0 with AB=CD Potential Reversal Zone (PRZ) Pattern - Weekly:
http://harmonicanalyzer.com/share/%5edji-7730-6015.png |
| The formation of the structure must be considered as one of the most significant technical events of the entire last six years. From a
Harmonic Trading perspective, the price action at the completion of this pattern will provide significant indication to the long-term prospects of the overall state of the market. I will address these ramifications as they materialize. However, until these are tested the trend remains down. |
|
What to Expect?... Despite the recent rally after
briefly sinking below the 11,000 mark, the bears remain in control. I would expect an eventual breakdown of this recent rally and another sharp decline to the mid 10,000 area. With the prevalence of the weekly
Bullish 5-0 pattern and the AB=CD pattern, there are several substantial technical events about to unfold.
Following this short-term bounce, I expect a complete test of the entire
Potential Reversal Zone (PRZ) at the 10,400
range. |
|
When to Expect?...
The following chart projects an ideal time interval for the AB=CD pattern to complete in mid-August.
It is important note that this is simply an ideal timeline for the completion of the structure. However, it does provide a defined
time zone for the validity of this pattern's completion. The entire scenario may require more time to complete and possibly extend a month or two beyond mid-August in its realization. Although the time constraints somewhat general, it does provide a definitive window for this scenario to
complete within the next 2 months. |
|
Potential Reversal Zone (PRZ) with Time of Bullish 5-0
Pattern with an AB=CD Pattern - Weekly:
http://harmonicanalyzer.com/share/%5edji-7736-2015.png |
|
Back in March, I outlined
the entire scenario for the Dow Jones Industrial Average at a
group presentation in Atlanta. In particular, I was addressing
the numerous Harmonic levels at the 11,600 area. In
essence, I was concerned that this area would eventually fail
and trigger substantial bearish continuation. To listen to that presentation, please click here: |
|
http://www.ichimoku.net/files/Scott%20Carney_speaker.zip |
| In summary,
the importance of the 11,500 was a mere first stop in this decline since the top last July. Without going into long details,
the failed patterns that converged in this area are now acting
as critical technical long-term resistance. The most important element of this
prior harmonic support area was the 0.382 retracement of the entire bull market rally from the 2003 low to the 2007 peak. Although this area yielded a brief
rally in April, the eventual failure of the various harmonic patterns and
this critical 0.382 bull market retracement has signified a greater decline at hand. As I stated in my presentation in March, I was very concerned and still am about the long-term state of the Dow Jones
Industrial Average. More importantly, a failure beyond the mid-10,000 area would essentially trigger a massive continuation and
an eventual retest of the entire 2003 low. For now, it is important to focus on the
current action and impending roll over of the recent
rally. The eventual test of the mid-10,000 area will
dictate the long-term action. It is critical to
prepare for this impending technical action and upcoming test of
this substantial harmonic support zone. Until then, it is
important to stay with predominant trend which is still down. |
