Where is DOW Heading?

Daryl Guppy published an analysis of Dow Chart at CNBC website yesterday. Key points to note:

1. 3 most powerful bearish signals in the market are a Head and Shoulder Pattern, a Rounding Top and a Down Sloping Triangle.
2. The Head and Shoulder Pattern on Dow took the market to first downside target of 11,200 in 2008. The October 2008 plunge set a potential support area near 8,000. The last four months have seen a test and retest of this general support area.
3. Over the last four months, the rally rebounds have developed a pattern of declining highs. The first anchor point for the trend line was set by the rally peak near 9,600 in November. The failure of the early January rally near 9,000 established, a second anchor point for a new trend line.
4. A new downtrend line using these two anchor points is drawn on the daily Dow chart. This creates a Down Sloping Triangle, a powerful bearish pattern in any market. In a bear market, the strength of the pattern is increased and suggests a high probability of a downside breakout.
5. Downside target is near 6000, close to long-term historical support near 5,600. A fall to this level moves the market out of recession territory and clearly into depression territory. Estimated time frame in mid-April 2009.
6. The market is entering the last third of the pattern development. Breakouts from this sector of the pattern can be very powerful and move very quickly to achieve their target levels.
7. A successful break above the down-sloping trend line has a target between 10,000 and 10,600. The measured base of 2,000 points is projected upwards from the point on the trend line where any breakout develops.
8. The test and retest of support near 8,000 is not part of a consolidation pattern preceding a market reversal. It is consistent with a bearish down-sloping triangle pattern.
9. The solution for survival in 2009 is defensive trading because there is no such thing as a defensive stock, a defensive sector, or a cyclical survivor in a depression market condition.