Dow' weekly
Dow' monthly'2, rainbow
Summary
For the equity doomer bears out there, the break of the Dow under the 200day MA today (14727) was very significant. Yes, we closed above it, but still..a break..is a break, and the daily/weekly trend remains very much to the downside.
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RE: weekly chart. It is barely noticeable on the weekly cycle, but we did indeed break the Aug' low today, and that is a rather important issue. There should be trend support around Dow 14500, but if the market gets really upset about a lack of agreement..we could break it..in which case things would spiral real fast.
RE: monthly. We have the third consecutive blue candle, and the Dow looks vulnerable to breaking the 10MA of 14760. Next level would be the big 14k.
The first lower low
Without question, the break below the 200 day MA was important today, but perhaps even more notable, was the Dow taking out the Aug' low of 14760.
It is a very basic issue in chart land, but one I think many have seemingly not highlighted today. The Dow is the first major index to have put in the first lower low..since the Oct'2011 low.
In many respects, the Dow is highly suggestive that the two year rally from Oct'2011...has concluded. If that is the case, regardless of what happens in the next few weeks, we should in theory see a multi-month down wave. Dow 12500 would be the natural target. Of course..that is a very long way down.
Dow, weekly2 - bearish H/S outlook
The Dow looks pretty good for a H/S formation, and it would offer a very simple target of 13500/12500 in the coming few months. Certainly, there is triple RSI divergence, and MACD (black line) could still fall for another 6-8 weeks before getting significantly into what I like to call 'flooring territory'.
For those seeking major autumn/winter market upset, I think the above chart is one to stare at for a good ten minutes.
Looking ahead
There is the usual weekly jobs data, but tomorrow will no doubt be consumed with continued chatter about when Obama/Boehner can reach an agreement. Frankly, I can't see that happening this week, in which case the US markets should continue to broadly slip lower.
*the next significant QE-pomo is not until next Tuesday.
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An interesting day, and despite the little bounce from the earlier low, the market looks increasingly weak. As many recognise, we've still not seen any major down days in the current multi-week down cycle. I'd be looking for something in the order of at least one day where the dow is -300 or so. That might be enough to wash-out the market, and motivate the political maniacs to reach an agreement before the end of next week.
Goodnight from London