For peeps not familiar with reading charts, see below.

We are looking at the two CCI (Commodity Channel Index) indicators at the bottom of the chart. They are momentum indicators, in that they measure the momentum of movement in the chart. This is recorded in numerical read out form. The bigger the numerical read out, the stronger the momentum driving the market, be it upward or downward in direction. As a Chart reader, in answer to that oft asked question "where is the market headed" Well all I can say is, I set greater store by the momentum indicators than actual last price recorded.

Now many may consider chart reading to be of as much use as the rune readings of warty old witches on Pendle Hill. But that said if your willing to be open minded about it, read on. I have taken the time out to show and explain this chart set up, not for my benefit, but for yours.

Right lets begin, look at the bottom of the chart, in the time period Sept 2001 to Feb 2003. This period on the chart shows how the Dow panned out as if fell from its 2000 peak (11908) to it's bottom (7197) of Oct 2002. The readings at the Yellow CCI "bottom spikes" of Sept 01 and Jul 02 where 210 and 207, with the down spike of Feb 03 failing to break [with conviction] below the -100 line drawn on the chart, the reading was 102, this was the confirmation that the Down Trend Reversal was in place. From there on in the Dow was in up trend mode all the way to the high of 14198 Oct 07.

Right, look at the chart set up now, can you see the "reverse mirror image" of the 2001 to 2003 chart set up?

Oct 06, Yellow CCI spike reading 208, May 2007 spike reading 192, Oct 07 failed break of the +100 line spike at 101, is the latter confirming Trend Reversal?

Who knows for sure, but I'll be watching how the market reacts as it nears 13700 in any attempted rally. If it breaks above that with conviction, we could see a Re-Test of the Highs

Remember, your managed pensions for the most part will be invested in stocks. Also remember, nothing goes straight up or straight down as a rule. So though I see the market headed down, in the short term time frame it can be all over the place. I made money going Short last Thursday, and going Long on the Friday, but by and large I would be looking to sell rallies, more so than buy bottoms. Remember high volatility is often indicative of a Market Trend Change being in the offing. I'm not saying chart set ups don't fail, because they do, but the longer the time frame, the better the chances of a successful call.

Non of the above is ment to be, nor should be taken as financial advice, it's just the musings of a warty old rune reader.

Well looks like my last Sunday night call was spot on, an attempted rally indeed took place but was rebuffed just short of 13700 on Tuesday at 13670. And it was Down Hill from there on in for the rest of the week closing at 13043, nice short eh.

So the Dow sliced through the Daily 200 day MA [moving average] like a knife through butter. Old market saying "Bulls live above the 200MA, Bears live below"

That said, in the Weekly chart the Dow finished just below the 21 day MA [13068] so we could possibly see another attempt to rally off this line. I say that, because whilst both the Daily and Weekly CCI's are oversold, in the Monthly Chart the longer time frame CCI [Yellow] is sat on the Zero line. And in the 60 minute chart the Dow closed "as near as the cat licked its @rse " on a retest of the mid morning low, A possible Double Bottom. But failing that, with no meaningful rally, and a break of 13000, then we are headed down towards 12800.......next stop the August low of 12500, now that's a biggie.........12400...and ...well lets not get ahead of ourselves.

My view in the long term is still down until my charts interpretation says otherwise. That said tomorrow it could go up or down, for the reasons given above. Therefore for day trading the daily movements, obviously shorter time frame charts are used for entries and exits, based on them being either technically Over Bought or Over Sold in those time frames.

The above is not to be taken as financial advise, DYOR.

Thanks for your posts I certainly appreciated your analysis.

Thanks for taking the time.

Typical, I did not bother this week because there were no replies to the thread, besides I was out partying on Sunday. At my age you do it from mid afternoon to mid evening, it was a family birthday party.

Not much to say really, as it is panning out as I thought. Loads of volatility, around the DJ weekly 50MA [red line on the chart] which stands @ 13100 close of trade yesterday. Big down day yesterday, after Fridays attempted rally up to 13211 failed to even test the 200 MA in the Daily Chart @ 13230. So down it went, breaking 13000, but it finished the day just below the Trend Line that has been supporting the market since the low of 10683 back in June 2006. That in mind I reckoned today we were in for another rally attempt. And after the initial early morning drop [to find where support lies] it motored up very nicely. So I was making money on the Long side this morning, with a nice Short at market peak, as the up leg was +55 points and the Peak sell off was -33 points, which was in part the Freddie Mac $8.1 Billion assert [fair value] loss announcement Out of the market right now awaiting the housing stats Data release for the US 1.30pm our time, as the market can whipsaw all over the place, which also buggers the charts up in the short term time frames.

Edit: for word error, I wrote the word "plating" instead of "panning"

Read it but didn't respond as the charts are over my head. I assumed it was 'good' news as the trend lines were down.

Hi BB,

I don't really see it as good or bad, I just see the charts indicating that the market up trend looks like it's changing to the down side. I'm only interested in where its going, so I can trade the right side of the market. Like I said in my second post



OK today we got the 12800 target, intraday low was 12787, with a closed @ 12798. Where next in the short term? Well, the Dow is actually sitting on the peak of an run up from the mid July 2006 low of 10683 to the 20th Feb 2007 intraday high of 12796, before it had a pull back of 756 points, prior to continuing it's up trend.

So whilst others are celebrating the 12799 close today, it could turn out that the 20th Feb high of 12796 actually acts as support for the market tomorrow. Plus the CCI indicators in the Weekly and Daily charts appear to support that option, as they are recording less downward momentum than when they were last Over Sold circa the 16th August intraday Low of 12518.

Those who Poo Hoo chart interpretation, might say "so what your saying is it could go up or down, big deal" Charting is not about giving definitive direction, how could it? What it does do is offer you better than pure guestimates, as to where the market might meet support or resistance.

Nice call Catch22.

I'm still a seller medium-term while the share prices catch up with the fundamentals.

Yes I also still see it as down, as the Monthly chart supports that. But we could have a bounce of 12800. I've added a chart to the last post.

OK, now I'm starting to get this chartist stuff. Its a straight line from the 20th Feb right across. I couldn't understand the movement in the DOW (apart from everyone was in a better mood after Thanksgiving) but it certainly seems to support your theory. I would guess the Bull rally will only be short term. I won 't be shorting the DOW however unless it shoots through, shows a pull back and falls again. Or something!

Yes, it had a nice bounce off the 12800 line for 180+points as I suspected it would, hence I was Long Friday. That said it has failed to break back above 13000, which has more significance in the mind than the charts. Next upward resistance is the Weekly 50MA @13100, then the 200MA @13235 in the Daily chart. Any failure to hit or hold above 13100 means a retest of 12800 would be likely. And any break of those support or resistance points, could lead to much bigger moves in the direction of the break.

Anyway I did not mean this thread to turn into a weekly forecast on market direction. It was just meant to show the Long Term Charts, IMHO, were showing the possible end of the long term up trend. But anybody wanting to read basic daily market commentary with the aid of charts, they can read some at SignalWatch And here is a web page giving what it calls the 20 Golden Rules for Traders again to be used in conjunction with charts. In fact there is much to learn for free on that website, spend a bit of time looking around it.