The Dow Jones Industrial Average has been a major disappointment for investors worldwide as it virtually erased its gains for the whole year and more in a span of just 4 weeks. Many are now scared that index could once again fall into a bear market but will it?
Now there’s a reason to be very concerned since the index has already breached its long-term uptrend line. However, it does not mean that we are now really headed for some more fall. As you can see from the chart above, while the index has likewise broken down from a head and shoulders formation, its minimum downside target has already been achieved. And if you look closely, what appears to be breaking the DJIA’s fall is the 61.8% Fibonacci retracement level of the second impulse wave. Moreover, if my Elliot Wave counting is correct, the ^DJI is still on its wave 4, suggesting another major rally to come to mark its fifth wave for it to complete the whole wave cycle. Also, a presence of a ‘bullish hidden divergence,’ where the index marks higher lows while the RSI makes lower lows, indicates a possible positive turn.
You see, there is still some hope at least from a technical point of view for the US market as represented by the Dow.