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Monday, January 2, 2012

Compelling Dow Jones Industrial Chart!

On this second day of the New Year, I decided to put together a very compelling chart of the Dow Jones Industrial Average from 1900-2011. The information it contains is something every person should be aware of! It concerns the way we live as a Society. However, because of skeptics not all believe in the power of the Elliott Wave Principle and other psychologically imperative technical indicators. The simplest of indicators, a trend line is an extremely powerful tool, especially on a larger degree scale such as a weekly, monthly, or yearly chart.

What most new traders don't take into consideration is the process of channeling. This long time frame holds up better with each passing year. The process of channeling is simply duplicating the original trend line that was created, in this case it was the lower trend line. I duplicated it and connected it to the middle most top in between the two lower connecting price levels. As you can see, the top portion of the channel provided both support and resistance. This channel is also used in conjunction with the Elliott Wave Principle to get an even better read on any financial market.

In 1995, you may see the Dow Jones Industrial Average break out of the upper portion of the trend channel. This accelerated buying is easily seen by the break of the trend channel. Once the DJIA broke above the channel, it retraced back to the upper portion of the trend line in the form of a double bottom. This was not an exact price level, but it was a great relative support indicator. As we go on after the market rallies again, one can really see the re-break of the upper portion of the trend channel and the Dow Jones Industrial Average really takes a beating this time in 2008 to converge back into the upper portions of the channel, but still within the channel again.

From this, one would expect the trend lines to be reinstated as basic support as resistance again. However, as I have written on the chart, we are now in an expanding triangle pattern. In an expanding triangle, 5 legs produce each longer than the last. Now I am a firm believer that we are in a bear market. That's what my objective Elliott Wave analysis has led me to believe. I also fundamentally believe that we are overbought as a market in general, so the two theories correlate well.

So for this post, I will end with what I believe to be a very plausible market outlook...

Short Term= Advance
Intermediate Term= Decline
Long Term= Decline
Even Longer Term= Advance

I haven't posted much yet, but the reason that we as individuals can beat the market is that the market is made up of a select few thousand with Trillions under management. They as a group can't all buy at the same time, just like they can't all sell at the same time. As individuals, you may use the analysis that they use to make their short and long term buys and use it against them. I call it piggy-backing the "Big Money" players. Others may call it just plain old smart business.

I haven't even elaborated on the depression of 1929-1932, I will though. I hope this opened people's eyes just a little. If you would like the full scoop, check out elliottwave.com

Trader Brandon

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