Monday, September 30, 2013

DJIA - CAN FED SAVE U.S. EQUITIES FROM THE FINANCIAL TSUNAMI

Hi Friends,

In it's latest meeting on 18th Sept. 2013 the Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs more evidence of lasting improvement in the economy and warning that an increase in interest rates threatened to curb the expansion.

So the message from FED is clear that it cannot Taper QE until Economic Conditions Improve. So it's clear that only QE is holding the U.S. Equities Up and not the Economy. But how Long FED will continue the QE? Probably Bernanke would never Taper, retire and leave the mess for the next elected person. Bernanke's term is ending at the end January 2014. So we might witness a policy change with the next elected person.

Wave Analysis:-
DJIA
Though there is uncertainty over the FED's Policy Decision and likely Future Economic & Market Outlook; Chart Patterns are suggesting a Financial Tsunami or a Huge Bear Market Crash in DJIA for the next 2 years.

As mentioned in my previous post DJIA seems to be in Expanding Pattern since 2000. The Rally from 2009 Lows looks a Corrective Rally and not a Directional move or an Impulse.

The Rally seems to be in its final phase with Intermediate Degree (Y) in play. DJIA has Strong Resistance near 16100 and upside looks limited. The Strong Negative Divergence in RSI on weekly charts is suggesting a possible Trend Change. Such Divergence was earlier witnessed at 2000 & 2007 Top. Break below 15000 will indicate medium term trend change. And break below 13660 will invite a huge downside back to 2009 Lows and even Lower to 5670.

At this point of time such a Forecast will sound absolutely ridiculous. But the current pattern on DJIA shows a high probability of test of 2009 lows. Such patterns have occurred in past on DJIA. There is no hard and fast rule as to occurrence of the similar pattern will produce similar price action in future. But we simply cannot ignore this pattern.


Trigger for this pattern to come true will be break bellow weekly Channel i.e. currently near 13660.



Thanks & Regards,


Harsh Dixit.

1 comments:

Karthi Keyan said...

Its also alt view corrective wave A(ABC) is expended flat,now B is End.All this view says Larger Wave C larger downtrend will start soon