As I am at office hours, doing my ongoing impression of the Maytag Repair Man, I thought I would finally do something I had avoided: find the very long term support points for the Dow-Jones Average. To do this, I had to convert to monthly bars (I can do this since I have a paid subscription), and went as far back as 1994. Here are the results for support should the current support of 7,475 fail:
Support #1: October 2002 = 7,198
Support #2: October 1997 = 6,933
Support #3: April 1997 = 6,316
Support #4: July 1996 = 5,170
The only good news here is that with the monthly chart and current levels of the Dow-Jones Average, the RSI is giving an extremely oversold reading of 13.3, which is its lowest reading by far over the entire period from 1994 through 2009. While this suggests a short-term bounce up, it is important to keep in mind that markets can remain in oversold territory for a while before such a bounce occurs. This is particularly true when analyzing monthly data.
NOTE: I have used lows, which are most appropriate to determining levels of support. The media generally uses closing values for this, which is technically incorrect.
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