Taking Stock

My bold prediction on FaceBook a week ago today was that within 2 to 3 weeks we'll see the DJI below 23,500, and under 22,000 in a few weeks after that. Yes, I am anticipating the worst.

As of today's closing, the DJI is down 285.16 points, ending at 26,118.09. The attached chart is the DJI daily closing values over the last few months. It includes a mid-day value, when the DJI was down about 360, instead of today's closing.  But that changes nothing.

DJI closings since May 1.  Data from Yahoo finance.

The purple lines near the top and bottom of the chart are the borders of the long-term trading channel, since the 2009 recovery.

The current short-term trend channel is indicated in orange. [Yes, there are channels within channels.] It takes a while to determine that a new channel has been established. This one began no later than the first week of July, and looks pretty sound. Of course, a trend only lasts until it doesn't.

The thin green line was the top of an old trading channel from 2002 to the crash in 2008, projected across time to the present. It converges with the top of the current orange channel on Sept. 27.  Resistance and support lines can switch identities over time, so what happens between now and then will be interesting. You can see it's already acted as a support line within the orange channel. Interestingly, the bottom of the 2002-2008 channel [not shown] converges with the red line [see below], right about now. So there could be a cluster of support lines near 2400 - 2500.

One of these is the yellow line, the midline of the very broad trading channel continuing from the 2009-on recovery. A meaningful break of that line will probably indicate that we are in serious bear market territory.

The red line is projected from the Feb 2016 and Dec 2018 bottoms. It is also a possible support line.

The bottom purple line is the lower border of a decade-long trend channel, and the most important support level. It that is breached, there will be a panic, and all hell will break loose.