September 11, 2009 - DJIA analysis

# Annual Cycle and analogy with year 1978:

This is the sample of analysis and forecast for DJI by means of Timing Solution software.

I always start the analysis comparing Dow data for a couple of the most recent months to the Annual cycle.  The Annual cycle provides a forecast based on previous years. Look at the diagram below. There was a good fit between Dow and the Annual cycle during summer months (red and blue lines are two variants of the Annual cycle):

According to the Annual cycle, we should expect a strong downward movement this fall. Should we? We have passed now the first decade of September, and Dow still continues to grow, It is a good sign.

Somehow the current chart for Dow reminds me the price chart for the year 1978. Here are these two charts together: the chart for the year 1978 (the red chart) and for the current year 2009 (the black chart):

We can observe here the same Annual pattern and the same optimistic beginning of the September. Let us look how Dow may move further till October drop.

# Support/Resistance levels

To do that, we need to make a next step: analysis of the most probable support/resistance levels. Technically it means that we provide the statistical analysis of 10% zigzag for Dow data starting from the year 1885 (we analyze in total 350 turning points).

If Dow is going to go up in the nearest future, the statistics reveals  these probable resistance levels (I take as a base the bottom turning point 8087.19 on July 8, 2009):

9855-9922

10099-10202

Now we can make a conditional forecast: if 9633 September 10, 2009 is a TOP turning and Dow is going  to move down after that, the statistics provides us these support levels (blue horizontal bands):

# Analogy with year 1942

There is one more very close analogy, with year 1942:

These modules of Timing Solution were used:

Seasonal Cycles http://www.timingsolution.com/TS/Mini/49/index.htm

Pattern Recognition http://www.timingsolution.com/TS/Programs/pr/

Turing Points Analyzer http://www.timingsolution.com/TS/Uphistory/tp.pdf

September 11, 2009