Dow and S&P Close Below 2002 Lows
Monday, February 23, 2009 16:12
The Dow Jones Industrial Average and the S&P 500 both closed below their 2002 lows.
ChartingStocks.net wrote in our 2009 forecast, contrary to Wall St consensus, that we expect the Dow Jones to breach the 6,000 level this year and touch upon 5,800. The risk to our outlook would have come if the Dow Jones was able to hold the 2002 low but today’s action just raised the probability of breaching the 6,000 mark.
While today’s close is technically significant, the real test will come at week’s end. Technicians pay greater attention to closing prices rather than intraday prices. The most important closing price is the Friday close. What price are traders willing to hold a position into a weekend with? Because of the added time and headline risk of a weekend, the Friday closing price is the holiest of holies. If the market doesn’t stage a significant rally this week, the probability of hitting 6,000 or below will increase greatly.
Below is a very long term chart of the Dow Jones. Fibonacci retracement levels suggest a break below 6,000 if this weeks decline holds. The MACD, a momentum indicator (bottom), has fallen off of a cliff. We should note that the RSI (top line) is well below 30 which is an indication of an over sold market. We don’t put to much weight into the RSI indicator at this point, because the market can, and probably will, stay over sold throughout the bear market.
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