Dow Jones Industrial Average (DJIA) Technical Analysis 2011.10.04

Possible falling wedge pattern on DJIA

Nice swing down on DJIA beginning from 27^th of September; both the targets in the previous analysis were achieved (10,950 and 10,550) (se DJIA analysis from 2011.09.28).

The Elliot Wave perspective shows a 3^rd wave developing that could go lower than the previous lows from the 23^rd of September ($10,550). I have no evidence of a possible reverse yet but if there will turn out to be a notable one, we should see a base forming in the area $10,450-$10,660.

On the 4H chart the last test of T1 trend line set the market for a sharp decline (see the 2011.09.28 analysis) that took the prices down towards the last local bottom (10,550 area).

The fifth wave down is likely to form a wedge pattern (though we don’t have enough evidence yet) and the target level is very hard to set. The trend is still short and until we see a bottom pattern we cannot create a bull (rally) scenario.