Whatever The Final Outcome, The DJIA Looks Positive

12/12/11 12:10:10 PM

by Koos van der Merwe

There are many programs out there that analyze the stock market. When they eventually justify what you believe, you feel relieved.

Security: DWIX
Position: Accumulate

For the past year, my Elliott wave charts have been telling me that the market is not in a recession, but in a correction that will move positive. With market bears looking for any reason to justify their beliefs, we can start doubting our charts. When all of a sudden, however, a program that automatically prepares an Elliott wave count agrees with your forecast, you can wipe the sweat from your brow, breathe a sigh of relief, and shout "Bravo!"

FIGURE 1: DJIA, WEEKLY, WITH ELLIOTT WAVE COUNT

Graphic provided by: AdvancedGET.

Figure 1 is a weekly chart of the Dow Jones Industrial Average (DJIA). The weekly chart suggests that the DJIA bottomed on October 7 and is now in a new bull phase. This is confirmed by the moving average convergence/divergence (MACD) indicator, which has completed a wave C and is now moving up. The chart follows the first rule of Elliott wave theory: the wave count must look correct.

FIGURE 2: DJIA, WEEKLY, WITH PROJECTED WAVE COUNT

Graphic provided by: AdvancedGET.

Figure 2 shows the two possible projections of wave 5 with a 63% probability (PTI). The chart suggests that the new bull trend should top out at either 13362 (conservative) or 15249 (hopeful). However, this is on a varying count to Figure 1, and the chart's wave count does not look correct, but the two targets could be kept in mind, nonetheless. A move by the DJIA above the high of 12944 of May 6 will confirm a possible move to these two targets.

Whatever the final outcome, the DJIA does look positive. The economic drama in Europe, and the political play in the US, both of which are bearish, look like they may be slowly fading. Outlook for the economic future does indeed look bullish.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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Comments

Date:�12/13/11Rank:�5Comment:�Koos...Merry Christmas. Thanks for your insights this past year. Dick Slayton

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Whatever The Final Outcome, The DJIA Looks Positive

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