DJIA – Dancing a Two-Step to Fibonacci Score

When it comes to Mr Fibonacci, his "levels" are as attractive as Casanova in his heydays, - that is to DJIA investors at least. The chart shows you just how much swing is in the daily steps, hitting the levels as if they were mere rungs on a ladder or musical scores. 

Rising through Fibonacci Levels
The rally arguably started in July, but you could also take the mid August low as the starting point, after the Dow temporarily broke below 10,000. The recovery was prompt and V-shaped; the rally went on in a grand way since. In October, the index passed the 4th level and then settled between the 5th level and the previous high in April.  November saw it bursting the range and running up to a new high for the year. Solid resistance blocked its path below 11,450. Since then, it fell back to the 5th level again, doing a two-step-up-down move every other day.  This Wednesday, it finally broke out of the narrow trading range, strongly moving toward its next target (mid December) of 11,450 – again, with a good chance to hit the higher note at 11,620 in early January 2011. 

I DO NOT SAY that it will advance in one straight line though!
Looking at the chart, there are still those ignoramuses who don’t want to see the relevance and beauty of a Fibonacci score line!

PEAK TIME FOR USD
Meanwhile the USD got its break to reach the 81. mark, but when it did (on Tuesday) I quickly drew a line, to say "thus far, but no further", short term.

You may remember that I hinted at taking profit for USD investors in my last update, too. Showing an engulfing red (negative) candle on Wednesday (end of day result in US) suggests that this view is correct and the USD should now recede to about 79.50, a two percent move.  

Why only that much?  Well, the PIIGS problem needs to be sorted pronto, - and a lower € will help.  Then again, a cheap € will also create more divergence in economic activity and strength between the Euro states. For instance, Germany’s exporters simply love the chance to build on previous successes with a low €.  This will probably make the DAX soar, the only Euro index to do so in quite the same fashion. - It did not even correct properly as most of the other global indices did!

This means that the much anticipated continuance of USD weakness may have to wait a little while, probably till early next year? Of course, Asian currencies are least affected by € / USD fluctuation, - they continue to show strength in accordance with economic realities here.

Lastly, how is the STI progressing?  Are our directional arrows still relevant?  

The index move down from its peak November 9th was more volatile than we had drawn (even taking a "dip in the Ichimoku Cloud"). Now, on the way up, we note a similar quality. So, yes, the path is clear - and remains valid. 
Of course, our model portfolios now carry almost ideal levels of equity again (= the right levels for this investment scenario!), so this upside is a welcome boost to our returns .

I presume that the next 10 days will be interesting!

Happy investing

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