Tuesday, November 10, 2009

Did the Dow break above the 3 year down trend line?

I have attached the 3 year chart of the Dow and drawn the 3 year down trend line on it as you can see above. Did we break above it? It is the question of the day as investors determine whether we are going to make a significant move up on the Dow and other indexes. The answer to the question depends on something usually not apparent. It depends on the thickness of the line I drew. If I use a standard 2.0 weight line, which is the weight of the line I have been using since drawing these charts, the unexpected answer is No! If I use a 0.5 weight line, which is almost the thinnest weight line I can draw using Powerpoint, the answer is Yes! So how does one decide whether to Buy into this rally at this late stage or not? You wait for a clearer breakout.

I know everyone is going to be screaming at me about this, but the signal is not yet clear that we are going to rise to 11,000 or higher on the Dow at this time or if we are going to retreat and have a correction. I know that sounds wimpy, but I only want to use data to decide, not my emotions. So there you have it. I will continue to use this thinner downtrend line when I draw this chart in the future. But when I can't say something for sure I look for alternative measures. In this case I give you the 3 year chart of the SP500. On this chart below, you can see that we have not broken the 3 year down trend line. That adds to my caution in telling people we are going to go up. If the S&P 500 also broke through this down trend line, I would be more optimistic.

I hope this helps understand why I have not declared that we are going up.

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Anonymous Anonymous said...

I'm beginning to really wonder what it is going to take for Beacon to move up again. Breaking ground is good news, but perhaps the skeptics will refrain from investing until full funding is in place. Still, it is surprising, and a bit disappointing. The stock should be pushing a buck, I think, with the slow but steady stream of good news.
I got a little TZA today, for a short-term trade, if I can pull it off.
I also enjoyed perusing your wife's work again, since I'd not admired it in several months. I like the horses, but many pieces are lovely, and betoken a "secret harmony" in the artist. She's able to avoid both gimmick and triviality, and makes pieces that are balanced, humble, elegant and honest. Again, congratulations to her.
jw (Minneloushe)

10:52 AM  
Blogger Charles Amico said...

Thanks JW. I will pass your kind words on to her. She wil really enjoy them.

Regarding BCON, there are still about 5 Million shares shorted on the stock. It is being managed to keep financial pressure on the company and to force them to do what they have been doing with their arrangement to have shares bought on the 5th and 20th of the month. It dilutes existing shareholders. I think the price is being kept low for a cheaper price/offer from a larger company who will buy them out. BCON does not have the capital to do this company bigger scale. If the stock price rose to high they would have the capital. Now they beg for scraps. It's a shame. They really need a White Knight or Angel.

6:51 PM  

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