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US Market Analysis

Analysis of the DJIA from November 2005 through to January 2006

DJIA from Wednesday 30th November 2005 to Friday January 13th 2006

Analysis from November 30th 2005

The stochastic is now at a level where the market usually either pauses or corrects, and the MACD is also high. We're close to the top of wave iii (circled) but I think it could have a bit further to go.

This is the best count I can see at the moment, suggesting we're in wave iv of (iii). If so, we should see support at around 10880 - the previous fourth wave low - and a fifth wave up towards 10975 or higher.

Analysis from December 30th 2005

However, that doesn't make it any easier to guess what pattern has been forming since the Dow's high of 10959.8 on the 29th November. It's playing with the 23.6% retracement, but it could easily fall to the 38.2% retracement at 10667, which is right in line with wave (iv) of iii (circled), and still be able to rally in a fifth wave. I do not think a move below the 10729 support level necessarily means that the bull market has topped. What's required at the moment to signal that is a clear five waves down which can't be considered as part of a correction, and I don't think we can say for sure that we've had that yet.

Zooming out for a bit of perspective, wave 5 looks too small at the moment, and the last 6 weeks price action looks like a consolidation before a further upside thrust. So I can't put my finger on a particular wave count yet, but I think the reasonable conclusion at the moment is that wave 5 must have a bit more to come, with support at around 10729, but a false breakout - a bear trap - down to 10667 is not impossible. That level, which was previously resistance, might now be turning to support, as a platform for a renewed attempt on the 2000/2001 resistance levels. But there's no doubting the weak momentum under this last up leg.

Analysis from January 4th 2006

It looks like the Dow's wave iv (circled) bottomed at 10684.5, having made a double zigzag.


The count is pretty clear.

And there appears to be a strong impulse wave on the upside which looks like wave (i) of v (circled). In line with previous issues, I think this makes an eventual foray above 11,000, possibly towards 11,200 on the cards. Support for wave (ii) could well come in at about 10800.

Here's how things have developed up to the close on Friday 13th January 2006.

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