Sunday, December 06, 2009

Dow Jones Three Month Chart

I'm fairly confident that markets will sell off next week but what will the dow do at its rising 50 dma? A break to the downside of this narrow range should give us a 50 dma test but if we bounce from there the bulls may get the confidence to push us to close at new year highs for op ex the following week. In that scenario my "out there prediction" would clearly end up false. On the other hand, markets are ripe for a sharp and severe correction as the US dollar corrects to the upside. I know its not exactly with the Christmas spirit but I would love to see a bloodbath this week that follows through into op ex as the VIX approaches its falling 200 dma. I like how most bloggers I am reading are looking for a big push before the market severely corrects, few seem to be expecting Christmas carnage. Maybe I am early, that's often the case. I certainly wouldn't be surprised if the Dow clearly broke out of the current range to the upside for a few days before getting whacked. But the market tends to move in such a way that makes most traders wrong so we shall see.

Disclosure: I have no position in the dow but I am net short.

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