Dow 10,000 - what comes next?
The Dow continues to grapple with the 10,000 level like an exhausted rock-climber having one hand on the ledge and zero energy left to haul himself up to safety. This is almost the exact level that the Dow recovery bounce failed after the 1929 crash, and with investor sentiment sitting at such extreme bullish levels history has the potential to repeat in a big way.
To go along with waning leadership - as the Dow Transports set up a potential Dow Theory sell signal as they have failed to confirm the Industrials recent rally attempts, to go along with weak semiconductor action and a very bearish looking Island Reversal pattern in the financials - we have the MACD indicator making lower lows and lower highs as the stock indexes have been making higher highs and higher lows, which is as bearish as it gets.
Twelve of the past thirteen rallies of this magnitude have ended with a crash to retest the 200 day moving average, and that is the minimum expectation going forward, with much more bearish potential after that. These technical warnings will not last forever, so investors better be acting fast to get their financial house in order, as the potential for severe stock market losses going forward is as high now as it was back in 1930 after everyone was convinced the worst was behind them.
Thus our message is a simple: "Buckle up, Lads" word of caution, as bulls make money, bears make money, and pigs get slaughtered.
Kevin Wilde, Chief Trading Strategist, AlphaKing.com
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