Sunday, September 28, 2008

DJI Chart

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Despite my bullish last week outlook (see the "DJI" post on September 22nd, 2008) on the stock market we had the attempt to retest the September 18, 2008 lows. Yet, the market did not hit the bottom, in opposite the DJI (Dow Jones Industrials) recovered half of the weekly decline during the last two trading session. Sometimes I have feeling that it would be much better if they did not even announced the bailout than announced it and then started to play political games around it....

During the past week we had strong decline. Because of that I decided to take a look at longer 1-year chart to see if the results of my previous technical analysis are correct.

DJI chart
From the DOW(30) chart above we may see that the magnitude of the volume during the stock market crash is very big. I have already mentioned in my "DJI Volume" post about my understanding of such huge volume. For me it's indication of the strong panic selling that lead the stock market into strongly oversold stage. If you may try to question it on the 60-day chart by pointing that September 19th rally up has released this oversold power, the 1-year chart make me believe that we did not even see the begging of the market reaction on that huge sell off:
  • The volume is still very high, which indicates we still have panic and uncertainty in the market. Yes, the last week daily volume is lower than the daily volume we saw in period from September 12 until September 19, yet it still far above the average daily volume over the past year.

    - The fact that the volume is down tells me that the moment of worst fear is over and there are not as many sellers as we had on September 17-18, 2008. Y

    - Yet, the fact that the volume is still high tells me that there are still a lot of sellers. However, as I always mention - if we see volume then somebody buying from these panic sellers and the fact that DJI is about 5% up from the September 18th low tells that the power of these buyers is bigger...
  • The same with VIX (Volatility index) - it hit the top on September 18 and now it's down and moving flat. It does not move up any more which is good sign. VIX still at high level which indicates highly oversold market. We did not see the VIX moving down which confirms we did not have yet the recovery reaction on the oversold market.
  • MVO is red. We do not see green MVO. That means that we had high volume surges during the price decline (panic selling) and we did not have yet high volume during the price advance (greedy buying).
  • Low SBV indicates negative money flow. Yet it declines which suggest weak market, however very low levels suggest possibility of very strong recovery.
  • MACD and Stochastics are in the recovery direction.
Overall, my 1-year technical analysis is bullish (in spite the last week 3-day decline) with exception of the SBV that could be considered bearish due its decline. I would still stay on my point highlighted in my last week post that I expect to see the recovery.

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