For Stocks, the Line in the Sand Has been Drawn
Here's what the Global Dow’s technical picture implies for the DJIA
by Bob Stokes
Updated: June 27, 2018
You may have heard pundits on financial television say something like, "I see support for the Dow at this price level," or "This stock should experience some resistance at that price level."
So, what do these analysts mean by support and resistance?
Well, according to Technical Analysis of Stock Trends, the classic book by Robert Edwards and John Magee, support means buying in sufficient volume to prevent any further downward movement in prices for an appreciable period. Resistance is just the opposite. It means selling in enough volume to satisfy all bids, thereby preventing prices from going any higher for a while.
On a chart, after a support line is meaningfully broken, prices tend to move more freely downward. The opposite applies when lines of resistance are broken.
When support and resistance have long held, or have been touched several times, the price moves after a breakthrough can be quite dramatic.
With that in mind, here's a chart and commentary from our June 22 U.S. Short Term Update (wave labels available to subscribers):
The Global Dow comprises 150 global blue-chip stocks, including all 30 components of the DJIA. Unlike the DJIA, which is a price-weighted index, the Global Dow is equal-weighted so that price moves in large stocks hold no disproportionate sway over the index. The Global Dow peaked on January 29, the day after the DJIA, and traced out [an Elliott wave pattern downward] to February 9, along with the U.S. blue-chip stock indexes.
But notice how each successive rally thereafter has topped at a lower high despite the hefty representation of U.S. blue chips...
Heavy is an understatement, because:
"...the U.S. accounts for more than 42% of the total index's valuation."
Needless to say, if the Global Dow's support shelf gives way, it could have profound implications for U.S. stocks, as well.
No One Can Keep Up with ALL of the Stock Market's "Fundamentals"
The daily information flow is vast -- too much for any one investor. Yet here's the good news:
Even if you could consume all market-related news -- you don't need to. Indeed, to base your investment decisions on "fundamentals" can be counter-productive
Contrary to popular belief, EWI's research reveals that the stock market's trend is NOT governed by earnings, economic data, politics, trade wars or any other news.
It's governed by the Elliott wave model.
Tap into what our Elliott wave experts are showing and saying to subscribers, so you can position your portfolio for the dramatic changes that our analysts see just ahead.
Read below to learn how to get started with our generous, risk-free offer...
Your Financial Forecast Service Team Helps Put YOU in Control of the Market’s Trends and Turns
Your Financial Forecast Service guides -- three of the best-known market analysts in the world:
- 1. Robert Prechter, Author of 16 market-related books, New York Times Best-Selling Author and Editor of Elliott Wave Theorist
- 2. Steven Hochberg, Editor of the Short Term Update and Co-editor of The Elliott Wave Financial Forecast
- 3. Peter Kendall, Author of The Mania Chronicles and Co-editor of The Elliott Wave Financial Forecast
As featured in:
You can be ready for risks and opportunities that catch most investors by surprise
Risk-Free, Start Your Subscription Now
for 1 month of unparalleled market insights