DOW Rebounds Trend Still Down

Investing Online - Stock Market for Beginners - DOW Rebounds But Charts Still Bearish

After falling below 7000 the DOW rebounded 150 points today to finish the day on 6875 - still 125 below 7000. A number of bears were calling for DOW to fall below 7000 since about a year ago, wjem most people thought they were nuts. All they were doing was looking at the stock market charts and drawing trend lines down from the double top we saw back in 2007. Their projection was under 7000 now Goldman Sachs has said it will go to 6000 and there are even some saying it wil go to 4000 ! That is still quite a drop if indeed it does happen.

Similarly with the S&P 500 - people were calling for 688, and though we haven't actually seen 688 yet we have been very close at 696 - the S&P bounced back to 712 today. I guess we could see another bounce tomorrow but my guess would be for a move up in the morning (US time) then a turn and a move back down. Thus giving a two day uptrend in a bearish market

On Feb 27 on CNBC Bill MClaren said "The next low if the index breaks the November low should be very close to a 1/8 extension of this range. Why, because that is what occurs in almost all similar circumstances. There could just be a marginal break of the November low at 734 to 712 but a run to just marginally below this 1/8 extension of the range to 636 seems more likely. Because the index is trending down from three descending trendlines the probability exists for this run down to be of an exhaustion or capitulation style and quite scary. But it also indicates this could be the last leg down to this trend. If the index does capitulate down it will recover the November low quickly no matter where the low."

So watch out for 636 [UPDATE - we got to 667 in March 2009 on the S&P500] on the downside in the S&P and as my mate Oscar likes to say "Don't fall in love with the upside".

Online stock trading is very difficult at the best of times and at the moment there seems to be more risk to the downside than to the upside when investing online.

See also - online stock trading for beginners

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