H&S Top: DJIA Retracing- Update to June 29, 2009 Forecast

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Price Objectives Identified in the June 29, 2009 Forecast

2X Extreme Upper Bound
10,948-11,500
Identified Resistance (Chart 1)-H&S completion level (Chart 4)

Extreme Upper Bound
9,021-9,043
Major Resistance (Chart 2)

Upper Bound
8,900
Chart 3

Current Price
8,529

Lower Bound
7,958
38.2% Confluence Zone (Chart 3)

Extreme Lower Bound
7,449
Charts 1,2,3,4 and 6

2X Extreme Lower Bound
7,193
Major Support (Chart 1)


Update

• In my June 29, 2009 forecast, I identified that the DJIA is correcting using the Elliott Wave Principle
  
• Today (July 9, 2009), 9 trading days later, an MA pattern or a Head & Shoulder top is clearly visible.
  
• The minimum price objective for the H&S Top is about 7,600.
  
• The penetration of the neckline was not on heavy volume. High volume break downs are not required at tops because the market has a tendency to fall on its own weight.
  Furthermore, this H&S pattern is fairly reliable because declining volume is evident on the head and right shoulder.
  
• A return move is in play.
  
• SMA-15 crossover of the SMA-50 triggered a sell signal.

June 29, 2009 Update/DJIA Weekly/Technical Analysis Base Home


Alternate Formation

• An alternative H&S top can be drawn with a brief right shoulder.
  
• In that case, the penetration of the neckline was accompanied with high volume.
  
• The return move to the green neckline also faced resistance.
  
• I wouldn’t classify this alternative H&S as a proper H&S because the right shoulder is more a bear flag than a shoulder.
  
• The bear flag pattern met the minimum price objective when it reached the brown neckline.

June 29, 2009 Update/DJIA Weekly/Technical Analysis Base Home

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Sanjeet Parab
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