Dow Jones - How Low Can It Go?

Dow Jones - STRONG SELL

After failing to recover last week's losses, the Dow Jones finally broke down again sharply today. Since giving my STRONG SELL SIGNAL last Friday, the Dow Jones has continued its move lower, and I now believe that we are indeed in a correction. I now strongly advise to sell long positions and take your profits if you have any. Opportunities can now be found on the short side. Now that the major up trend has been broken with a cross down below the 50 day MA, I expect the Dow Jones to head back at least towards its 200 day MA which currently stands at 9417. However, keep in mind that now that the market is moving lower this will affect the 200 day MA negatively and it will be moving lower and lower as the days go by. The same goes for the 50 day MA which was trending up until recently, and is now flattening, meaning that it should start moving down also. Now that the Dow Jones is looking to continue lower, the question is: how low can it go? To help us answer this question I decided to use Fibonacci Retracement Levels. Fibonacci indicates a possible pullback towards 9123. A fall below that level would send the Dow Jones back down to 8614, 8105, and finally 6457. Obviously a move back towards 6457 would be catastrophic and something major going on in the economy would have to trigger such a sell off. For the moment, the most realistic assessment is seeing a pullback back towards 9123; at least that's the level we're aiming for now. If the Dow Jones does reach this level, we will be waiting for either a BUY SIGNAL with a bounce back up or another SELL SIGNAL with another move lower.


When we look at the Dow Jones' weekly chart, we see yet more evidence that the Dow Jones is now in a correction. First of all, just like in the daily chart, the major up trend was broken last week. However, what gives the Dow Jones' SELL SIGNAL the most reliability is the fact that the MACD has given us a SELL SIGNAL also. Why is the MACD so significant in this case? Simply because it had given us a BUY SIGNAL for the Dow Jones back in March after the market bottomed. Since giving that BUY SIGNAL, the MACD line has stayed above the signal line during this bull run, until now.