Market outlook Oct. 7th, 2009

Yesterday's rise in the Dow to close at 9731 set up the middle high point of the "W" pattern and sets up the next leg down to form the 2nd bottom point of the "W" pattern. If the next leg down does not go below 9,500, we most likely will see another rise above recent highs and quite possibly hit the 10,000 level. If it goes below 9,500, it will have broken the uptrend line which started at the low around March 10th on a 1 year chart. So these next few days are pivotal in determining where we are going in the market. The dollar is set to rise today and so the market is set to drop. Also, my guess is that today's volume will be more than yesterday's and the market will drop on this higher volume. Stay tuned. I will do a complete analysis of the charts this weekend.

You will notice that the Blue support line is converging to the Red resistance line and as it pinches together there will be some breakout here, either to the upside or the downside. My guess is to the downside, as it fits my prediction made back in late August. Today is the start of earnings season, as Alcoa reports after the bell. Be sure to come back to see this story unfold!