A medium-term uptrend had started on March 9, 2009 at 6440.08 and reached 10767.15 on January 14, 2010. ^DJI gained -4327.07 points, or -67.19%, in 44 weeks.
A short-term downtrend had started on January 14, 2010 at 10767.15 and reached 10023.80 on January 28, 2010. Dow Jones lost 743.35 points, or 6.9%, in 14 days. Price is near the trend low.
There are two possible scenarios that we would like to consider.
1. The Dow Jones medium-term uptrend is completed. It has formed the three waves ABC structure. A new medium-term downtrend has started on January 14. The current short-term down wave that has started on January 14 is a first sub wave of the new medium-term downtrend.
2. The Dow Jones medium-term uptrend is still in progress. The current short-term down wave that started on January 14 is a forth sub wave of the current medium term uptrend.
In both cases, the short-term downtrend is close to conclusion. Short-term rally may start soon. Daily Williams' Percentage Range and Lane's Stochastic are oversold. The short-term down wave is near the support trend line. Almost 20% of S&P 500 members have an uptrend support alert.
If scenario #1 is in play, the current down wave may take longer and break the medium-term uptrend support line. The reversal might be weak and short. Dow Jones will not reach the recent high (10767.15).
If scenario #2 unfolds, the support should hold, the reversal may start sooner and Dow Jones will move toward the medium-term uptrend resistance line which is currently near 11120.
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