How Bear Markets DIE - Stock Market Technical Trend Analysis

Stock-Markets / Stock Market 2023 Dec 08, 2022 - 09:49 PM GMT

Dow Short-term Trend Analysis

The Dow is bouncing off a new bear market low of 28,700 having already broken above the preceding low of 29.7k that targets resistance at 31k. However given the degree of momentum behind this rally the Dow could easily continue climbing to target 32k which would represent a sizeable 12% advance in what I would consider as being a sub-swing i.e. not the whole move which implies that this rally that apparently is being dismissed by most as bear market rally could eventually retrace the whole disown move from the 34k high. But for now the Dow 1st targets 31k and then 32k before it is likely to correct towards 30.5k before RESUMING it's bull run.

(Charts courtesy of stockcharts.com)

Dow Long-term Trend Analysis

The Dow fulfilled my primary target for this bear market by retracing all the way to the 29,600 pre pandemic high. Whilst it would have been nice if the 29,600 low had held, however it was never probable as where the markets are concerned things never tend to turn out to be so simple and hence the Dow confused all by setting a new bear market low at 28,700 and then abruptly doing a u-turn, something that I was prepared for, for how things could play out i.e. at least 1 spike below the June low just to get moist convinced of much lower prices, akin to dancing with the market devil, trying to anticipate it's nifty footwork.

TREND CHANNELS - The recent decline whilst to a new bear market low failed to make it all the way to the support channel, this could indicate that the SELL off off 34k is NOT over. However more probable is that this indicates relative strength that marks the demise of the bear market given that the 34k high breached the upper channel and thus two relative strength indicators against the preceding bear market into the June low.

TREND ANALYSIS - The Dow has made a lower at 28.7k, which means it is not going to be easy for the Dow to break above the 34.3k higher high, so any trend back towards 34.3k will fail to break higher and thus resolve in a significant correction back towards at least 31,500 and probably lower and could even set the stage for a further NEW bear market low where we have a contender for at 26.1k after failure of 29.6k to hold. So trend wise the new low still has the bears in control of the trend and it is upto the market to prove that it can make a higher low.

RESISTANCE - Resistance is along a string of lows at 30.1lk, 30.6k, and 32.3k.

SUPPORT - Apart from the new bear market low of 28.7k, the next support would be 26.1k.

MACD - MACD is at the most over sold state that it has been for the duration of this bear market, and thus the current surge higher should not come as much surprise, even though it has to most! The rally has scope to run for several weeks. probably months which chimes well for where we are i.e. a setup for a 3 month bull run into the end of the year.

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By Nadeem Walayat

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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

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