Sunny Side of the Street

Dow Jones Industrials Commentary

12/07/2007--Looks like the Dow has met the first downside projection to 12886, as indicated on the Daily charts by my Dynamic Moving Average.

I am still looking for lower lows, dropping to the 11778 level, retracing to the previous high from December 1999.

Yes, that looks awfully low, but I think it's what we're in for. Housing prices have been dropping here in California for close to 2 years, interest rates have been slowly rising, and foreclosures are at all-time highs.

More foreclosures are yet to come, with adjustable mortgage rates putting monthly payments out of reach for most families. A glut of foreclosures on the market will bring about another slump, and the market will make a fast correction, only to be followed by new highs as money goes from dead houses into the only other place of hope.

The weekly chart confirms that projection, with the predicted low never happening. Since it didn't happen as expected, it is still in our future. This confirms that a low of 11,700-900 is still imminent. Watch your toes.

The daily chart shows a current short signal from my Dynamic Moving Average:

The gray line (signal line) has turned up and crossed over the red histogram, giving notice to take profits from the short signal. It has not yet said to cautious traders to go long, although scalpers might prefer to go ahead and jump in. For cautious traders the crossing of the zero line signals long trades are in order, and the breakout from 13730 is very nearby.

I tend to be risky, so I would take the long trade as soon as the breakout occurs and take first portions of profit as the Dow touches 14,000.