On 14 Oct 2014 Dow closed in negative territory, down a mere 5.88 points or 0.04%. It was the straight fourth down day for Dow. This happened after Dow steadily climbed above 16450 in morning trade. The slide was unnerving for some. It showed how all strengths were sold into. Sell on rise must have been the call amongst influential traders. Bulls must be licking their wounds after this sustained Bear hug in second half of trade yesterday.
Now the clamour has grown louder that Dow has entered Bear territory. "Sell your portfolio and sit on cash" is the advice from experts. They are pointing out that Dow has decisively broken below 200 day moving average. This is construed as significant pointer to Bear market and a clear signal for the end of Bull run. I beg to differ.
For last two decades, every time Dow has violated 200 day moving average it has bounced back with fresh vigour to go beyond its previous high. You can check the veracity of my observation from record of Dow movement in recent past. In June 2012 Dow dropped below 200 day moving average almost to a level of 12000. Within about four months it rebounded to above 13500. Again in Nov 2012 Dow pulled back below 200 day moving average to level of 12500, only to bounce back with vengeance to 16600 by Dec 2013. In Feb 2014 it again violated 200 day moving average of 15500, only to spring back to 173500 in Sep 2014.
My short point is that closing below 200 day moving average encourages Bulls to pick up stocks at relatively comfortable prices. And that is what is expected of Dow in coming days. If that doesn't happen then Dow will make history of sorts by not bouncing back above its previous high after breaching 200 day moving average for the first time in 25 years!!
Now lets wait and see in coming days whether I am on right track. If you recall from my preceding post, I had set the target for Dow to move from level of 16400 to 18000. We are witnessing these gyrations and volatility in Dow as precursor to positive rebound, which will take it beyond its all time high. Isn't it how Dow has behaved in the last 25 years? So stay invested and trade on the buy side.
Now the clamour has grown louder that Dow has entered Bear territory. "Sell your portfolio and sit on cash" is the advice from experts. They are pointing out that Dow has decisively broken below 200 day moving average. This is construed as significant pointer to Bear market and a clear signal for the end of Bull run. I beg to differ.
For last two decades, every time Dow has violated 200 day moving average it has bounced back with fresh vigour to go beyond its previous high. You can check the veracity of my observation from record of Dow movement in recent past. In June 2012 Dow dropped below 200 day moving average almost to a level of 12000. Within about four months it rebounded to above 13500. Again in Nov 2012 Dow pulled back below 200 day moving average to level of 12500, only to bounce back with vengeance to 16600 by Dec 2013. In Feb 2014 it again violated 200 day moving average of 15500, only to spring back to 173500 in Sep 2014.
My short point is that closing below 200 day moving average encourages Bulls to pick up stocks at relatively comfortable prices. And that is what is expected of Dow in coming days. If that doesn't happen then Dow will make history of sorts by not bouncing back above its previous high after breaching 200 day moving average for the first time in 25 years!!
Now lets wait and see in coming days whether I am on right track. If you recall from my preceding post, I had set the target for Dow to move from level of 16400 to 18000. We are witnessing these gyrations and volatility in Dow as precursor to positive rebound, which will take it beyond its all time high. Isn't it how Dow has behaved in the last 25 years? So stay invested and trade on the buy side.
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