$DJI-DOW @ 4500 WATCH IT! 20 Year Massive Head and Shoulders...

Ok so I've been watching this right shoulder form since October of 2009, patiently waiting for it to develop.  Being that it was an election year I thought that it had topped out and that it would likely move into a trading range until after the election.  However, based on the action since the Goldman civil suit was announced I have been considering that it could fail sooner than that.  In fact we could be seeing the first throes of the downside, with the recent geo-political, geo-financial and geo-environmental issues.

From a techinical aspect this doesn't look very good, from a fundemental aspect it's starting to rollover.

Check out Brian William's on Letterman... He's certainly right this isn't a joke though as you can see from the chart above we've been working on a twenty year head and shoulders.  Technically the right shoulder will drop somewhere below 6500.  I was surprised by the velocity and ferocity of the sell off.  The fact that it continued into the weekend is decidely ominous.  This is not even a market to stay short for too long either as the snap backs will be breakneck events.  Wait till everyone starts pulling their money out of 401k plans after this weekend.  Europe's attempt to prop up the Euro will likely prove futile.  With so much mis-trust of the capital markets we are likely to see credit and the bond markets freeze precipitously.  In other words here we go again.  The Greece populace is decidely fed up and since they invented democracy they have the right to uninvent it. 




Here is a more expansive view of the $DJI using tick data from the 1900's utilizing Fibinacci retracement lines I was able to identify specific levels of support and resistance for the DOW, notice that the in the Thursday "Flash Crash" it reached a Fib line at 1050 and bounced right back up, remember prior support is now resistance.  Another item that I would like to point out to you is the period from 1978 to currently, what would I attribute to this rise?  Two things, the "Rise of the Machines" and "Rise of the 401k" Plans.  I will be writing more expansively on these topics in the next few wweks, but both play a big role in the the market proclivities of the last 10 years.