Revisiting the Dow 20,000 Call
- Posted by Greg Harmon
- on June 6th, 2014
On May 8th, 2013 I finger tipped a piece titled Dow 20,000 is a Possibility in 2013. The Dow had just crossed 15,000 and even back then there were the constant calls for a pullback. The piece laid out that 16810 was a real possibility by year end from an AB=CD pattern. This pattern is favored by many in a market that is making new highs for both its upside target potential and timing. What I failed to mention last May is that the timing can be off a bit. Turns out it was off by about 5 months as the Dow just reached the 16,810 level this week. Not so bad for a pattern that was working over 27 periods. But now that it has achieved this target what should you look for going forward? Lets revise this analysis.
The same AB=CD analysis remains in place. The Dow could continue to a 127% extension of the AB leg and finish at 18,540 or at 161.8% extension up to 20,770. Or it could stop anywhere in between. Sticking with the Fibonacci ratios the next target would come at a 113% extension or 17,640, before the 127% and then the 138.2% at 19,250 and 150% at 20,010. The momentum indicators support continued upward price action. The RSI is venturing into overbought territory but it is far from being at any extreme level and moving at a very flat angle. The MACD continues to rise as well. The SMA’s are all running with an upward sloping angle and the Bollinger bands are opening higher as price rides the top band. There really is not anything in this chart that says it is ready to stop.
Our next possible levels from this analysis then are 17,640 and 18,540.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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